Purplebricks warned that its profits would be lower than expected as the online estate agent has suffered a sharp slowdown in the number of homes it has to sell, with the UK housing boom showing signs of tailing off.
The agent said it expected to be instructed on 22,000 property sales in the six months to October 31, down almost 40 per cent from the same period a year earlier.
That is a steeper fall than many of Purplebricks’ rivals, indicating a considerable loss of market share to competitors.
Estate agents have enjoyed a bumper pandemic as property demand has been stoked by the government’s stamp duty holiday and tumbling mortgage rates.
But high demand has eaten into the stock of homes for sale and a slowdown in sellers bringing their homes to market, coupled with an expected interest rate rise on Thursday, has darkened the outlook for the rest of the year.
Shares in Purplebricks plunged more than 30 per cent to 36p in early London trading on Thursday. They have lost more than two-thirds of their value this year.
“Clearly we have underperformed the market,” said Vic Darvey, chief executive of Purplebricks. “We’ve encountered the same challenges as everyone, but the difference with Purplebricks is that we have introduced a lot of disruption on to ourselves in the last six months . . . in order to build a platform for growth.”
Purplebricks has had to absorb increased staff costs because of a shift in the status of the estate agents it recruits. Its agents have historically been self-employed, but this year the company said it would move them to full employment contracts.
Darvey said he had expected to lose market share as a result of the shift. “It’s gone a lot better than we anticipated,” he said.
According to property portal Rightmove, the number of properties coming to market in the six months to October 31 was down 23 per cent on the same period in 2020.
That has hit other estate agents and is one reason why shares in London-focused Foxtons have fallen 25 per cent over the past six months.
As a result of the fewer instructions and the costs of shifting to the full-employment model, Purplebricks said it expected operating profits to be lower than it had previously guided.
Analysts at Peel Hunt said they now expected Purplebricks to post a pre-tax loss of £12.4m for the current financial year, having previously forecast a £1.2m profit.
Purplebricks is also facing the prospect of legal action from hundreds of current and former estate agents who were classed as self-employed. They believe that, despite their formal status, they acted as employees and were therefore entitled to holiday pay and pension contributions.
The company bringing the claim, Contractors for Justice, has estimated that each agent could be in line for thousands of pounds if they win and that the total bill for Purplebricks could run to tens of millions of pounds.
Purplebricks has denied that its self-employed agents were more akin to full-time employees, saying that they each ran their own businesses.
The Aim-listed company, which charges a flat fee to market properties, is the UK’s largest standalone agency brand, responsible for about 5 per cent of UK sales last year.
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