Nation of Online Homebuyers
July 12, 2018
It may come as no surprise that we are officially a nation of online shoppers; for almost a decade, the UK’s comfort factor in using the internet to research and buy goods and services has put us at the forefront of online shopping. In 2011, an Ofcom report showed that more consumers in the UK used the internet for purchases than any other major country, and recently an EU report stated that 88% of UK shoppers bought goods and services online making us the most confident online shoppers in the EU.
If you needed more evidence, just in the past week, we saw the Office of National Statistics announce that it would be transforming its data gathering to measure what the Telegraph is calling the ‘Amazon Effect’ on the prices of goods and services. With internet retailers now accounting for more than 20% of the UK market, it seems right that the ONS factors in the nation’s online shopping habits to better reflect the nation’s behaviour and an insatiable appetite for online.
For one reason or another, our high level of trust in buying online has encouraged us to incorporate online purchasing into every aspect of our lives, and we have grown up on a diet of products, goods and services that are bought with the click of a mouse and delivered directly to our door. Remember the early days when we sold a stereo on eBay, bought books on Amazon or found a weekend break on lastminute.com? This is not going to change as millennials and Generation Z, the true digital nomads, expect to be able to purchase online; 67% of millennials say they prefer to shop online.
Online has not only provided us with the convenience that we craved but has also re-written traditional models of doing business across a variety of sectors including banking, leisure, retail and transport. The disruptors are those names that we hear on a regular basis such as hotels.com, Airbnb, Uber, First Direct, Amazon…. the list goes on.
However, in the property sector, buying and selling online has been at a slower pace – until now. While not exactly providing a buying and selling marketplace, it’s important to recognise the impact of the early pioneers in the online property space; Rightmove and then Zoopla. For example, Rightmove was created in 2000 through a joint venture between four of the UK's largest property agents Halifax, Countrywide plc, Royal & Sun Alliance, & Connells who decided that the UK needed help in finding properties online. Today Zoopla, Rightmove and new market entrants list properties from thousands of estate agents and developers generating significant leads; Rightmove = 130 million views per month, Zoopla = 50 million and OnTheMarket = 3 million.
There has been no doubt that first Rightmove and then Zoopla were in the right place at the right time to ride the crest of the wave as the British consumer gained confidence and trust in the online process. Fast forward to today and research shows that 89% of recent home owners looked for available properties online and 86% searched online for house prices while 79% went online to help research where they would like to live according to HSBC’s Beyond the Bricks research. Yet again, we are the most digitally active when it comes to house hunting online. The same research shows that we are way ahead with 93% of us using online channels to research a recent property purchase and now over ¼ of home buyers are opting to shift online to begin discussions with an estate agent.
Using online to research a potential property without the need for viewings is rising in popularity; in the US, a staggering 35% of people who bought a home in 2017 claimed that they made an offer without first seeing the home in person. This is up from 19% in June 2016. This is largely enabled by the popularity of new proptech tools available such as 3D software that allows people to explore properties online as well as the vast array of information that is now accessible that can help decision making such as articles about the local area’s amenities.
However, there is a difference between researching a potential property online and purchasing a property online. But the dial is now beginning to shift. In the UK, we are seeing a flurry of new online estate agents that are disrupting the existing sector to such a degree that one in five high street estate agents are at risk of going out of business according to figures. This new breed of online estate agents is taking advantage of technology and lower overheads to sell homes for less passing on the benefit to both the buyer and seller. The most famous include Purple Bricks, Tepilo, Yopa, eMoov and others with fees typically under £1,000.00. With 29% of sellers stating that traditional estate agents are not very good value for money, online models such as these are proving to be a growing choice for an increasingly digital savvy and cost-conscious millennial generation.
The importance of the online estate agents and their ability to solve some very important challenges and frustrations in the sector cannot be understated. And we’re not just talking about exorbitant fees that are charged. Buyers and sellers tolerate slow service, increased levels of stress and concern about potential gazumping. Government research in the past few years has confirmed that too many consumers have a poor experience when they buy or sell a home, and that there are issues at all stage of the process including a significant cost to consumers from failed transactions. For many buyers and sellers, the process of buying and selling in the traditional estate agent model is cumbersome; over half buyers (59%) and sellers (57%) found the process of buying and selling a home longer than they expected; around one in four found it much longer than expected.
Increasingly digital is seen as the solution to these problems, and it is clearly starting to disrupt all segments of the property sector. As well as online estate agents, we are also seeing the birth of new models in the buy-to-let sector that has lacked any significant innovation for decades. Recognising that the buy-to-let market was broken, a handful of industry stalwarts and property professionals are creating new online marketplaces designed for landlords and investors in the Private Rented Sector. An example is the Vesta Property buy-to-let marketplace that removes commission and replaces it with a fixed fee that includes all marketing to potential investor buyers. The property is sold with tenants-in-place at an agreed fixed price, and all documentation, valuations and rental records are made available to the buyer who buys a ready-made income generating investment.
These new online start-ups are rapidly gaining traction. They are also able to innovate quickly and efficiently because they are not constrained by the burden of branches and high overheads. Innovation will be essential to the future of any estate agent, and there is no option but to innovate. It won’t be long before AI and machine learning will enhance the buying and selling process tailoring the experience to individuals in ways that are difficult to imagine today. Firms must be looking to innovation now if they have any hope of surviving in, what is already, a highly competitive space.
Whether a landlord wanting to sell a portfolio of properties or a first-time buyer, new technologies designed to reduce time, stress, cost and effort for buyers and sellers could see us become a nation of online homebuyers in a very short space of time; the transformation is just beginning.
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