There are some big property marketplaces out there with problems related to their consumer base, there are others with problems with the relationships they have with their inventory suppliers and there are some with major problems with their corporate culture. In general though, if we look at share prices, the business model underpinning portals and traditional marketplace sites has been seen as a good bet over the last decade. The seller and the agent acting on their behalf both want to get their merchandise in front of as many potential buyers as possible and they pay portals to do this. The more successful a portal is, the more its success is perpetuated.
There can be few more herculean tasks in business these days than trying to turn a profit by starting a new property portal. Even in a market where agent dissatisfaction with the incumbent portals is sky-high and you have (most of) their backing, OnTheMarket has shown that getting into the black is still anything but straightforward.
So are there any chinks in the armour of the business model that upstarts can look to? What happens if sellers’ homes never even reach the portal results pages for example? There are several scenarios where this could happen and some of them have been happening more and more since the onset of the global Covid-19 pandemic.
Companies with a more exclusive model
If you could sell your home without the hassle of listing on a property portal, would you? This is the key question that several proptech companies around the world are asking home sellers. The two buzzwords here are ‘passive activation’ and ‘network effect’; if you can tap into sellers who might not be willing or ready to list their home and connect them with buyers who are more motivated than your average portal browser, you’re on to a winner. Several startups are using variants of this business model including Realy, Soho and the much-heralded Listing Loop in Australia as well as PropertyHeads in the UK. A social medium around property that is free to sell on could be a traditional property portal’s biggest competitor sooner rather than later.
Bigger Agencies and Privacy and Safety Concerns
Returning to the question of being able to sell your home without listing it on a portal, what if an agent pitches you the idea that because their network is so large that their company can find a buyer without the hassle or intrusion of a portal listing? 1000 Watt CEO, Brian Boero recently posited this scenario in his excellent newsletter. Concerns around health and safety are growing and agency groups are only likely to conglomerate as the market constricts. In the USA there is some controversy here around the National Association of Realtor’s new Clear Cooperation Policy which requires agents to upload any property to the MLS within 24 hours of marketing them publicly. In other countries without an MLS this theoretical agents’ pitch may snag even more home sellers and leave portals without those listings.
More Competition for Listings that Would Never Make it to Portals Anyway
Figures are hard to come by for obvious reasons, but off-plan central London property tends not to make it as far as Rightmove before being snapped up by investors with friends in the right places, and London isn’t the only city. These investors are often buying agents for overseas buyers, an increasing proportion of which come from East Asia. As the number of buyers from East Asia seeking to be ‘Citizens of the World’ increases the type of property they go after could shift out of the centre to less prime parts of these Western cities meaning fewer listings ending up on the local portals.
A recent press release from an agency group in Southern Turkey tells of a sale that went pretty much like this: Agent uses drone and 3d tech to make their own cool listing, buyer sees listing and likes it, agent puts buyer in contact with seller, buyer pays for house with bitcoin. While the story almost certainly glosses over some friction in the transaction, and the part where presumably the buyer dons some cool sunglasses and drives off in a speedboat having just bought a house they’d never seen with bitcoin, the role of a property portal is not stated. Although these are of course edge cases, they are only going to increase.
Sight Unseen Offers Are Up
This is not just hearsay. The aforementioned NAR in the States released results from a survey of its members in mid-April saying that a quarter of them had received sight-unseen offers for properties in the past week. Yes, these buyers would have undoubtedly seen these homes on property portals first but the trend is not only symptomatic of better quality listings and a desire to avoid travelling and human contact. It is also about supply. Fewer properties available means more demand and more competition which is seen in both the trend for sight-unseen offers and in some portal’s own stats. Redfin recently released a report saying that listing volumes in the USA in May were nearly 19% down on last year.
Rent to Buy
A recent article from Spanish portal idealista suggests that with the domestic property bubble about to burst a new transaction model, which sees prospective buyers given the option to rent for a while before being given the option to buy, could become more prevalent. The Bank of Spain has said that because determining the value of a property may become a lot more difficult for mortgage brokers that they might be able to do so based on the rental price. Greater unemployment leads to more supply and less demand as people have to dig into savings to get by. The solution for all parties could be that potential buyers are given the opportunity to live in a property as they save up enough to buy it. Obviously, in these cases the property would only be a rental or sale listing once meaning only one advertising fee for the portal.
The Economy as a Wildcard
Clearly, with portals all around the world reporting record traffic, they might be forgiven for seeing these reasons as distant specks on the horizon. Distant specks can quickly turn up to take your customers however, much as the portals did to local newspapers 20 years ago. The fact that many countries are teetering on recession is the big unknown here. If you had asked hotels in 2008 about the security of their business model most wouldn’t have mentioned the speck that was Airbnb.