Swiss bank UBS has released a new report by its analysts warning investors that property portal Rightmove's revenues will soon be under pressure as agents' personal profits edge downward.
UBS has downgraded its rating for Rightmove to ‘sell’ from ‘neutral’, despite raising its target price for shares from 500p to 505p.
Its report says it expects agents’ commissions to remain under pressure “in a weak macro environment and from competition from hybrid agents”.
UBS looked at 17 UK estate companies and said that their profitability was down 25% between 2014 and 2018, meaning they had less to spend on Rightmove.
It specifically noted that some agent chains, including Countrywide, Foxtons and Your Move, “struggled to make any profit at all in 2018”.
The report adds that while online agents offer vendors an upside, it does not think these will add material traction to the market.
The report says that Rightmove could capture 8% of agent revenues by 2018, against 5% in 2018, but also casts doubt on advertiser numbers.
UBS says that for Rightmove to sustain revenue growth of 7-8%, it would have to hike agents’ subscription costs per branch – and it says this cannot be done in current market conditions.
Instead of hiking ARPA (average revenue per advertiser) by £85 a year, Rightmove would have to increase its average charge to agents by £120.
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