Purplebricks put up a “For Sale” sign after the online broker warned that efforts to rebuild its business would cost much more than expected.
The company told investors on Friday that it expects losses of between £15 million and £20 million for the financial year ending in April.
A combination of failed international expansion, problems in the rental business and a costly corporate restructuring contributed to slow business growth, the company said.
In March, she also lost her former CEO, Vic Darvey, “for personal reasons.”
The company is currently conducting a “strategic analysis” of its operations and may use an “alternative ownership structure,” the bosses said. This “may or may not result in the sale of the business.”
The Board added that it is not currently negotiating with potential applicants but is now open to formal proposals.
CEO Helena Marston said the company has “never been in better shape going forward” but acknowledged that the failed restructuring caused “more short-term disruptions” than expected.
This marks a decline in the popularity of a company whose shares once traded at £5 but were now worth less than 10p yesterday.
Lecram Holdings, the activist investor who owns 5 percent of Purplebricks, said a “lack of relevant experience at the top” has brought the company to this point and called for “quick completion” of the review.
This represents a loss of confidence in online brokers as analysts warn bay and wholesale homebuyers still choose to visit the physical equivalent for peace of mind.
Purplebricks was the leading online brokerage firm, much larger than its competitors YOPA and Strike. The online real estate industry, which began as a housing market turmoil and as a response to home sellers getting fed up with paying high agent commissions, has long struggled to pull business away from its high street equivalents.
While Covid lockdowns have made it much more difficult to find homes in person and have led to significant digital shifts at banks and newspapers, the same cannot be said for real estate agents.
Online agencies and hybrid agencies that have multiple offices and also sell online once had an 18 percent market share in terms of ads peaking in April 2022, but by 2023 that share has fallen to less than 8 percent. real estate platform 99Home.
Buying a home is stressful, and many people won’t want to do it without a real estate agent they know personally or who can call if something goes wrong, says Danny Hewson, head of analytics at investment platform AJ Bell. .
“There is also the added benefit of great local market knowledge that national players and online platforms may not have,” she added.
Anthony Codling, CEO of online consultancy Twindig, says that while some sellers liked Purple Bricks’ low prices, others would have preferred to choose a “good real estate agent” who could add thousands to their selling price.
“The Purplebricks model is like flipping a coin,” he added. “They have sold about half of the homes listed, and in the long run, this opportunity will not work. Most people fear loss more than gain.”
While high street agents typically charge around 1.3% of property value, Purplebricks charged a flat rate that started at £1,349.
However, this is due to the fact that the housing sector faces great obstacles. Both real estate agents and banks predict that home prices will fall by 10 percent or more, urging investors to consult with both builders and real estate agents.
Hewson noted that rising inflation, the impact of the mini-budget on mortgage affordability, and the cost-of-living crisis have undermined consumer confidence and their ability to even consider buying a home. This pressure is unlikely to disappear in the next 12 months.
But Purplebricks can find a suitable bidder if it can solve online shoppers’ problems, Hewson added. “The name could have prospects that kick the company into hoops, especially at such a low price point,” she added.