SA’s real estate market: a target for disruption
“The success of Uber and AirBnB has shown that technology is capable of disrupting a market; and the real estate market is certainly a target for disruption”
With some online estate agencies such as Purplebricks rapidly expanding, realtor leaders advise excellent service as best defence against disruption in the traditional property industry.
UK-based online estate agency, Purplebricks, thanks to generous investors, has been able to expand its business, within three years since it was founded, to other first world markets such as Australia and lately also the US. Their business model is based on cutting out high commission fees and asking a set price, irrespective of whether the property gets sold or not.
In recent media statements Purplebricks alluded to further expansion plans. Property Professional asked some local realtors whether they thought there’s a chance South Africa could be their next target for disruption; and then, what their thoughts are on the vulnerability of SA’s traditional real estate market versus online competition.
JP Farinha, CEO of Property24, said he doesn’t believe Purplebricks would expand this way because the South African market is relatively small and because of the high cost involved in establishing a new brand locally.
Mark Coetzee, COO of Private Property and Paul Stevens, CEO of Just Property, both thought Purplebricks will focus first on establishing themselves properly in the USA, after that the possibility of them looking at smaller markets like ours are not ruled out.
“The success of Uber and AirBnB has shown that technology is capable of disrupting a market; and the real estate market is certainly a target for disruption,” Coetzee reckon and explained that in his opinion disruption generally happens for two reasons, price and inefficiencies in the market; and both these problems exist in the South African real estate market.
“Agent commissions in South Africa are on the high side,” he said and said they have tested agent response times to leads generated off their platform and unfortunately more than 50% of the leads generated on Private Property were never answered. “This sort of service is the reason that disruption is a real threat,” he explained. Coetzee suggested agents provide exceptional service and expertise to justify their commissions and to differentiate themselves from disruptors.
Crispin Inglis, CEO of PropertyFox, one of SA’s online estate agencies, also said that the global real estate market is ripe for disruption, “especially as SA along with France still charge the highest commissions and so interest from other businesses in this space would not be surprising,” he added and said that it was for this exact reason that PropertyFox was started in 2016.
That raised the question what the local property industry would do if Property24 and Private Property, together SA’s biggest property portals, were to start selling property online?
“There is no doubt that the property portals wield much power in the industry, holding the ‘intellectual capital’ (property listings) that is the cornerstone of estate agencies’ successes,” said Stevens. He mentioned Zillow, one of the largest property portals in America which started last year to allow private owners to sell their properties on the portal. “Our South African portals are already in the process of moving in that direction and we must remember that Private Property many years ago was very much based on the private seller model but was ahead of its time,” he added.
Any moves of the portals to move into the agency space would almost certainly be challenged heavily reckoned Stevens, saying that the market strength was closely monitored by industry stakeholders and then referenced the Property24-Private Property deal in 2016 that was then successfully challenged.
Coetzee responded Private Property have no intention to reintroduce a direct to seller model. “Our job is to find these agent partners buyers. That’s the strength of our offering and is what we intend on focussing on going forward,” he said.
Similarly Farinha said Property24 would not consider adopting the model of Purplebricks as they would then be acting as the estate agent which would compete directly with their customers. “Property24’s purpose is to provide the best possible online platform for estate agents to market their properties and certainly not to become an estate agent.”
Coetzee said it is key for traditional estate agencies to keep their focus on good service delivery to property shoppers. “Disruption will only occur if the real estate agents in our market lose sight of what is important to property shoppers and disregard them in the process. Those agents that focus on delivering good customer service, leveraging property marketing platforms like Private Property to the maximum and engaging directly with their own networks, will always be relevant,” he said.
“If agents evolve their service and provide the top-level support that today’s property shoppers demand, then there is no reason to believe that traditional real estate model won’t continue to thrive for many years to come,” Coetzee concluded.
Image source: https://www.tonyrobbins.com/career-business/what-disruption-really-means/