Purplebricks/hybrids eating online; eMoov up for sale; housing crisis overdone & more

Purplebricks and YOPA eating other onlines as a starter

Another interesting pattern from my listing monitor. Here is

a selection of agents and their listings over time. You can see the fastest growers in terms of listings are LSL main brands (Reeds Rains & Your Move), Purplebricks and YOPA. The fastest declines are the other onlines. This makes sense for PB and YOPA growth – those who are already comfortable with doing business online will be attracted by the hybrid offering. PB and YOPA can double in size just by eating the other onlines but the real test will be if they can take business from the traditionals in a significant way. My bet at the moment is that they can and the pivotal moment will be when they can get something like the same local knowledge by increasing the intensity of coverage of LPEs.

Listings for sale over time

(Online composite includes nine names including House Simple, House Network, eMoov, Tepilo, Hatched and easyProperty)

 

eMoov is up for sale; CEO knifes Countrywide

The CEO of eMoov outlined why he thinks Countrywide has missed the target with its strategy. Clearly he’s a vested interest and its mainly to highlight that eMoov is up for sale. Here’s the sales pitch: “Countrywide should [have] invest[ed] in eMoov to get the inside track on our customer focused technology platform (built and optimised ages ago now), the cost reduction and customer empowerment that such technology allows; [and] our rather unique approach to marketing… eMoov is not just about great value and better fees, it’s about the experience… Our high street colleagues are having to accept their inability to compete on such service.” He goes on to value the business at £40m (ok, but note eMoov has been losing listings at a material rate in the last two months – let’s see if it rebounds post-summer).

If you’ve been reading this blog you’ll know I think Countrywide’s Flexi-Service is just hybrid window dressing on its existing offering. According to the eMoov CEO, the flexi-service cost £6m (!) to develop and they used Deloitte (!!) to develop it. I’d say that was a real cost of poor decision-making that puts MCO’s £8m initial price for EweMove (£7m earnout to come) into a better light for what looks like a real hybrid platform with current sales.

 

What housing crisis? The UK is building about enough dwellings for its population

I’ve been looking at dwelling formation in the UK vs household formation. It strikes me that the housing crisis so often pumped by the press and some politicians is overdone. We’ve all heard the stats about housing undersupply but looking at net new dwellings (as opposed to just new house completions) and the numbers are far closer to household formation projections.

Not only that but the household formation projections assume a 5% reduction in the size of the average household (what happened to kids living with parents until their 30s?). If I strip those out, we’re already building enough dwellings for new households. So, no, everybody can’t have their own home, or portfolio of homes, but there is enough for the population.

So why do some think housing is so pressured in the UK? I’d argue it’s the competitive nature of the economy. Want to move out? (Ok, but you’re competing with people who need to move out and investors in the game of debt assumption), the still very loose lending standards and concentrating ownership. To change those you’ll have to be a braver man than Phillip Hammond so expect continued support for housebuilders and perhaps some further measures to cool the BTL sector. That plays well to the lettings specialists like Belvoir, MCO . As I’ve written before, changes to legislation drive landlords to the specialist groups of which Belvoir is a preeminent name.

 

Forterra results: hanging on to the housebuilders

Forterra results this week gave a number of interesting points. It saw local authority spending down as projects were delayed. Quite a few are saying this now including the road surfacers but generally most have been able to replace this business. FORT saw destocking by merchants and greater sales to housebuilders. I’m not keen on that trend for the producers as it’s lower margin. The big 3 producers are chasing the housebuilders. I prefer MBH, which isn’t.  FORT uses of capex are telling. The spend at Hams hill is defensive- FORT has had trouble with PFA supplies for concrete blocks so will spend £500k to enable use of conditioned PFA. The spend at Peterborough on the 4th London/Fletton brick kiln shows pockets of strong demand exist for non-volume product – again pointing to MBH for me. FORT’s results were fair enough but I can’t help but feel could use their assets better. FORT finishes off with “Market fundamentals remain attractive”. (Don’t tell the NAEA!).

 

Brexit doom still not showing in the data, housebuilding slowing?

In the latest RICS housing overview and resi reviews it’s surveyors have seen house price growth slowing but still positive (outside of London); price growth expectations increasing; buyer interest rebounding; transactions steady but vendor enquiries sharply down and stocks for sale reducing suggesting that transactions won’t hold. Halifax house prices for August were up 6.9% yoy even if 0.2% down on July. That ties in with my expectation that prices will be supported but transactions fall in the period of uncertainty. E.surv report suggests mortgage approvals in July were 5% down on a year ago.  Remember though that stamp duty changes in April make it hard to say it’s a like for like comparison of true demand. ‘Small deposit’ approvals were higher than a year ago at 18.3% and high deposit buyers with a deposit of 60% or more were at 33% (again, what crisis?). The rental market looks strong with Belvoir reporting 6.75% rise in rents and Your Move 5.2%. Data from DCLG shows housing starts have been declining and recent RICS data suggests it has continued to slow down. Considering the main listed names have been increasing output, it’s the private and SME builders that have been scaling back, exacerbated by tightening credit. What to make of all this? I still think the HBs are in a good position – I like the look of Gleeson’s business – as are the letting agents – Belvoir my top pick, let’s see their next move. Estate agents are not (transactions) so look to the hybrids/Purplebricks.

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