Once upon a time, estate agents were accused of charging outrageous fees simply for introducing buyers to sellers; how times have changed.
Today, estate agents have become the victims of an altogether more sophisticated operation, or should I call it, ‘Racket’?
Every year, Rightmove sends us what resembles less an invoice for advertising and more a ransom note. At the anniversary of our agreement this year, they have asked for their fees to rise from £35,661 to around £40,000, an increase of roughly 15%, yet inflation, meanwhile, is politely ambling along at about 3%.
Apparently, it appears, that Rightmove inhabits an economic microclimate, all of its own. The explanation is simple. It can and it does!
NUMBER CRUNCHING
Let’s forensically examine the numbers. As an illustration, last year Rightmove generated, for Glentree, 806 telephone enquiries and 655 emails, a total of 1,461 leads and the cost this year for this will be in the region of £40,000.
That means every telephone call costs us £49.63, every email £61.07, and every enquiry, of whatever description, £27.38.
Zoopla, which is the main rival to Rightmove, on the other hand, generated 554 calls and 653 emails, a total of 1,207 enquiries for us.
This effectively means that the cost to Glentree is £21.66 per call, £18.38 per email and £9.94 per enquiry.
So Rightmove delivers just 254 additional enquiries across an entire year, around 21% more leads than Zoopla, yet it charges three times the price.
Those additional enquiries therefore cost approximately £110 each.
“If this were presented on Dragons’ Den, Peter Jones would ask if there’d been a typing error.”
If this were presented on Dragons’ Den, Peter Jones would probably ask whether there had been a typing error.
Rightmove charges are less a premium and more a triumph of market dominance.
To be fair, the picture may be different in other regions of Britain, where Rightmove is often the first and last stop for buyers and renters.
PRIME LUNACY
London, however, plays by different rules. Prime buyers arrive through many sources, i.e., personal contacts, international referrals, buying agents, Google, social media, repeat business and company websites.
Reputation still opens more doors than algorithms.
For many London estate agencies, Rightmove is no longer indispensable, it may be merely unavoidable. There is an important distinction between these.
None of this should surprise investors, a business enjoying historic operating margins of around 73% is clearly doing something extraordinarily well although the present share price of around £4.49 is 46% down from 52 week high of about £8.27, may tell a different story about future prospects.
The question is whether it serves its customers ‘brilliantly’ or is just charging them ‘brilliantly’.
CLASS ACTION
Maybe this is the reason why there is a class action filed in the Competition Appeal Tribunal by Jeremy Newman, seeking damages of approximately £1.5-1.6billion on behalf of around 7200 estate agents and new home developers across the UK.
History is not kind to businesses that mistake dominance for destiny, as is so colourfully illustrated by the demise of The Yellow Pages, Blockbuster and the most notable example, Kodak, who thought that film was indispensable.
Every monopoly eventually discovers that technology can be fiendishly disrespectful.
ELEPHANT IN THE ROOM
The ‘elephant in the room’ is artificial Intelligence (AI) which is already circling its prey.
Soon buyers won’t browse endless portals, they’ll simply ask: “Find me every house matching these criteria, analyse the planning history, compare price reductions, estimate future value and arrange the viewings.”
AI won’t care which portal owns the listing, it will simply deliver the answer in seconds, for no cost to the agents or consumers, and hey presto, portals will be an archaeological entry in the history books of the Industry, as were telephone directories.
Ironically, the estate agency profession has spent decades defending itself against accusations of overcharging but compared with Rightmove, our industry is looking like a parable of moral virtue and may be closely reminiscent of the discount aisle at Aldi.
Rightmove remains an exceptional company but whether it remains exceptional value is quite another matter. I think not.
“The monthly invoice feels like paying a malignant, medieval toll keeper to cross the bridge.”
The monthly invoice for us, feels less like paying for advertising and more like paying a malignant, medieval toll keeper, simply to cross the bridge.
The trouble with toll bridges is that they may continue for a while until, someone eventually builds a ring road around them.
WE HAD A CHANCE
I tried my damnedest to give estate agents some semblance of leverage against the near-monopolistic chokehold of Rightmove and Zoopla by founding OnTheMarket.com in September 2010.
For a brief, glorious moment it looked as though the Industry may finally stop behaving like turkeys enthusiastically voting for Christmas.
Then came the sale to CoStar in 2023, and the great surrender was complete.
Years of effort to create an agent-controlled counterweight disappeared with the stroke of a pen.
The Industry calmly dismantled the only meaningful defence it had ever built and wandered, in orderly fashion, straight into the lion’s den.
“Every year the lion grows larger.”
The ending could scarcely have been less surprising. Every year the lion grows larger, hungrier, and more expensive, while the gazelles dutifully debate whether they should run a little faster or simply offer themselves with better garnish.
The true absurdity is that the portals possess no inventory of their own.
Every property, every photograph, every floor plan and every pound of value is supplied by the very agents who then complain about the ever-rising tribute demanded for the privilege of advertising their own stock.
It is a remarkable self-flagellating commercial arrangement: the prisoners not only build the prison, lock themselves up and dutifully attend the punishment beatings that are metered out so liberally.
None so stupid as those who simply won’t learn!
