Shaking Up the Digital Property Pie
“The local online property space is expanding fast. What are these start-ups doing better or just differently?”
It is easy to dismiss low-commission, online estate agencies as corner cutters with unsustainable business models. They are alright for some, but surely the discerning property seller will pay for excellent service and the novice realises it would be foolish to go it alone when negotiating possibly the biggest deal of their lives? That dismissive view would be a mistake. Low commission rates, and talk of a R65,000 saving for every R1m of the selling price, might make some headline news. But property start-ups’ improved customer service, professionalism and access to advice make for compelling subheadings.
Ron Newman sold his Bryanston East house via PropertyFox, an online estate agency, in April 2017. Previously the traditional valuation process and a lack of market insights and accurate sales data on the suburb had frustrated him. “PropertyFox’s technical ability and knowledge solved this,” he says. As well as a lower cost than a traditional agency, it was the fixed fee that appealed to Newman. “There’s no dispute over negotiating with the customer, with an agent pushing for a faster sale or waiting it out for something better. With PropertyFox I never felt there was a conflicting agenda.” PropertyFox has since settled on a 1.5% commission and no fixed fee option.
Clearly if there is a traditional industry ripe for disruption, it’s property. A determined vanguard of property technology start-ups are harnessing new digital business models, tools and technology such as mobile, cloud computing, online marketing and big data analytics to do things better than traditional estate agencies. And they are gaining traction. Property platform eazi.com launched in early 2017 with a focus on improving the seller and buyer experience. The goal is more transparent, easier, cost-effective buying and selling, plus tech support – including submitting and accepting offers online 24/7. The system verifies potential buyers before viewings, and offers a full service for a fixed fee of R29,500 – payable only on a successful sale. Although the company has operated in beta since launch, they have averaged one to two property sales a week, saving sellers about R80,000 in commission per sale. PropertyFox also screens potential buyers, and assists sellers with marketing and post-sales administration, with owners typically conducting viewings themselves. Since its April 2016 launch the company claims it has saved South Africans about R5.5m in agent commissions. This is based on 1.5% commission charged on 60 sales valued at R96m – compared with a typical industry average of 6.5%. Likewise, HomeBid charges 1.95% commission and receives 85 exclusive mandates a month. The company anticipates 100 monthly sales by the end of 2017. “By 2022 we expect to have 15% market share of the 200,000 homes sold a year for between R300,000 and R10m,” says HomeBid GM Cavan Sheahan. Leadhome, a hybrid between a traditional and online agency, charges a flat fee of R29,995 and says it has sold “hundreds” of properties since its launch in 2015.
ONLINE RENTALS TOO
Digital disruption is not exclusive to property sales though, with new entrants such as HouseME and Ekaya shaking up the rental space. In the seven months since launching in September 2016, HouseME – a rental management platform that allows tenants to bid on rental property auctions – has listed more than 1,000 independent landlords and 1,300 tenants. Tenant placement and management is 2.5% of monthly rentals, and 25% of any amount achieved over the landlord’s reserve rental price for the duration of the lease. Ekaya, a rental payment platform that is currently emerging from stealth development mode, has already facilitated the payment and collection of R1.2bn in rental fees.
So how are these new entrants able to lower prices, offer better customer service and still run sustainable businesses? Just like disruptors in other industries, they are tapping into the power of new technology. Take the smartphone: the iPhone is only a decade old, yet many of us can’t imagine life without it. “HouseME is a technology company focused on the property industry,” says HouseME CEO Ben Shaw. “And further, we have no incentive to maintain the status quo, which gives us licence to try things that ultimately eat into the historically high profits service providers have enjoyed.”
Shaun Minnie, eazi.com CEO, concurs. “We are continually testing and learning. Initially we deconstructed the process of buying and selling a home into the various elements that make up the transaction – including the role of the estate agent. We then designed optimal solutions for each part of the transaction. In most instances, this looks like a combination of processes and technology.” Says Leadhome’s CEO Marcel du Toit: “We try to automate as much of the process as possible. For example, enabling bookings to view properties online, which saves both time and resources. We are able to process higher volumes of monthly sales than the average one property per agent every two months.” Technology also enables better communication between sellers, buyers and agents, and is eroding the need for branches in multiple locations, reducing overheads. Leadhome’s new self-service platform Simpli keeps sellers informed about each stage, right up to the handover to a conveyancing attorney. Harry Hattingh, Leadhome’s principal agent, says that property professionals remain crucial to the future of real estate and to the Simpli model. “By pairing the best agents with cutting-edge technology, the Simpli platform allows Leadhome agents to sell property more efficiently than traditional agents but with the guidance, advice and support sellers would not get from online-only agents,” says Hattingh. HomeBid emphasises savings. “Today property portals attract most of the buyers in the market and the cost is minimal in comparison to costly print adverts,” says Sheahan.
“By 2022 we expect to have 15% market share of the 200,000 homes sold a year for between R300,000 and R10m – Cavan Sheahan, GM, HomeBid”
Get your house in order
Aside from sexy customer-facing apps, traditional agencies should upgrade their internal processes. “If you don’t get it right internally ﬁ rst, then the external ‘glamorous’ digital channels have no solid base for success,” says Mimi Nicklin, head of marketing for the Pam Golding Property group. The company’s IT and digital marketing teams collaborate to ensure internal systems such as databases support improved seller/buyer service.
“We try to automate as much of the process as possible – for example, enabling bookings to view properties online, which saves both time and resources” Marcel du Toit, CEO, Leadhome
CLICKS AND BRICKS
Savvy traditional players can learn from these new entrants. “Advancing technology will look to enable and enhance the traditional mode of transacting, as opposed to replacing or disrupting it. Most sellers and buyers would prefer to involve a trusted and credible third party agent to facilitate the process,” says ee Properties national mareting manager Ted Fraser. But he agrees that new technologies will assist in streamlining the process. Some start-ups are open to collaborative relationships. Ekaya is equally suited to landlords as to rental agents and investors. Says Ekaya CEO Justin Melville: “Our goal has always been to service the entire rental market. The traditional view is that there is a professional agency and private landlord divide. Few entities even consider the tenant worth serving.” Its tempting to paint a picture where the rise of technology-driven, disruptive new entrants spells the demise of traditional players. But traditional taxi services still exist despite the shakeup by Uber. Hotels still welcome guests despite AirBnB. Consumers shop in stores, even with the convenience of e-commerce. Internationally a “clicks and bricks” hybrid real estate model is emerging to o er the est of both worlds, and South Africa will probably follow suit. What is for sure is that increasingly digital and savvy customers will no longer settle for the status quo
What sellers want
It’s all very well launching a digital solution, but it has to meet consumer needs. Eazi.com CEO Shaun Minnie says surveys of “thousands of home owners” by eazi.com showed these insights:
- 90% of sellers want active assistance when selling a home
- Most sellers want a local specialist to visit their home
- 75% of buyers and sellers feel commission is not justiﬁed, preferring a ﬁxed fee
- Most buyers ﬁnd their homes on major portals and then contact an agent