Purplebricks needs to change its pricing model if it is to stand a chance at achieving its target market share, a report says.
The report issued by UBS to its clients upped share price forecasts for Purplebricks. It suggested that closure of the company’s Australia and US operations would benefit the company’s future performance. It said that uncertainty over Brexit and the UK economy would mean Purplebricks would miss its target of achieving 10% market share within 3-5 years, but that it would still likely achieve 7.5% by 2024.
However, UBS said that the company needs either an improvement in the fortunes of the housing market, or else to change its pricing model, in order to achieve their forecast share price. UBS said: “Key to reaching guidance is a rebound in the housing market or a change in the pricing model which brings in additional instructions through the reduction of the upfront commitment.”
While the UBS report was prepared with stock market investors in mind it is the comment re pricing that will intrigue many in the property business. Purplebricks’ fixed fee pricing has very much been its raison d’etre since its formation, and perhaps its main selling point. However, many in the industry have suggested it is, on the contrary, a weak point with vendors increasingly dubious about the wisdom of paying up front, sale or no sale. Now that founders Michael and Kenny Bruce have left the business it will be interesting to see if the current directors take this advice on board and explore new pricing models for Purplebricks.