Can real estate really be disrupted?
A couple of weeks ago I posed the question as to "Why has real estate sidestepped the technical transformation of the digital age?" and in so doing provided a couple of key reasons why it is hard to disrupt this industry as so many other industries have been disrupted through technology. The fact is, at its heart, real estate is a deeply emotional service-based business which due to it infrequency is tough to challenge.
Over the years there have been noble challengers to this billion dollar industry, most notable was The Joneses back in 2008. Their demise in my opinion was not their core business model of a flat fee service and salaried agents. Their downfall was simply bad financial management which meant that they simply ran out of money just before they reached critical mass, which they were certainly approaching at pace. They were certainly also not assisted by a property market that went into a nose dive at that time and a fair amount adverse undermining from the established industry players. In my view the model if rekindled today with adequate funding could make a serious dent in the market. After all who cannot relate to the strap line of "Flat Fee - Not Fat Fee" - their flat fee at the time was just $7,999! - any house anywhere.
In the UK only this week we have seen a new challenger announce a new service of real estate (yet to be launched) which could be a serious disrupter in the market - welcome easyProperty. Leveraging the ubiquitous brand of easy as in easyJet / easyCar / easyHotel / easyBus / easyPizza - you get the idea! this new company is seeking to shake up the real estate industry starting with property management and then addressing sales. From sketchy information so far the principle seems to be that easyProperty will charge 0% commission on sale of property, looking to earn income from referral and ancillary services wrapped around the processes of real estate. That is certainly a possible method for the UK where agents do not undertake such an extensive service as in NZ but then they only charge on average 1.8% commission as compared to NZ commissions of 3%.
As well as the marketing strength of the easy brand which claims a 99% brand awareness in the UK, the new company has secured as Chairman Harry Hill who was the former boss of the largest real estate firm in the UK Countrywide. as well as one of the founders of the leading real estate portal Rightmove.
I would judge this is a serious venture and has the funding to get this new venture off the ground, as to the full details of how the service will work we will just have to see in the coming months.
What relevance could this type of move have for NZ?
Well I would have to say that there are two NZ brands that in someways mirror the easy brand. The first has already entered the real estate market a couple of years ago - Mike Pero Real Estate. The Mike Pero brand is extremely well known however their business model in real estate is not radical and could hardly be called disruptive. It professes to be a champion of low fees but in reality the differential is modest at best and in all other aspects, their services are a cut and paste of every other real estate brand.
The other brand is Trade Me. They currently dominate the advertising service sector of the real estate industry gradually eating away at the c. $100 million a year industry still so tightly held by newspapers and magazines, but imagine for a minute the appeal of a full service real estate company provided by Trade Me - tapping into the $1,300 million a year commission industry - even if they were to discount this by offering a Flat Fee - not a Fat Fee. Food for thought!