An online estate agency backed by Neil Woodford, the high-profile fund manager, and Wonga founder Errol Damelin is to list on London’s junior market before Christmas.
Purplebricks is to float on Aim with a £255m valuation, it said on Thursday, becoming the first of a series of digital start-ups in the property sector to achieve a public listing.
While online portals such as Zoopla and Rightmove are publicly traded, Purplebricks belongs to a new breed of agencies offering a rival service to traditional estate agents that is web-based and far cheaper.
The 18-month-old agency, which is also backed by Paul Pindar, former chief executive of Capita, has conditionally raised £58.1m from an institutional placing. Old Mutual and Artemis are among the asset managers buying stock, the group said.
It filed formal notice of its intention to float on Aim with a market capitalisation of £240m. That compares with £487m for the listed estate agency Foxtons and £900m for Countrywide, the country’s largest listed agency.
Purplebricks launched in April last year, offering a fixed-fee service that now costs £665 plus value added tax, or £995 plus VAT in expensive London postcodes, which is payable whether or not a home is sold.
This compares with percentage-based fees charged by traditional agents that amount to an average £3,600 plus VAT on a £200,000 house, according to the consumer group Which?. These fees are paid only if a transaction takes place, however.
In what it calls a “hybrid” model, Purplebricks operates a network of 165 local licensed agents who provide face-to-face services, but does not run branches. Extra charges are incurred for services such as agents handling viewings.
Purplebricks is one of a handful of property-focused digital start-ups, also including eMoov and HouseSimple, which together are estimated to command a market share of about 5 per cent.
The new entrants have been advertising heavily in an effort to lure customers from traditional agents, which have suffered this year from fewer homes being placed on the market across the UK.
Anthony Codling, equity analyst at Jefferies, said: “Estate agency is essentially a cottage industry, and Foxtons have shown what can be done if you professionalise parts of that.”
He said, however, that reservations about Purplebricks included whether the company would be able to recruit good quality agents while keeping its fees low.
It could struggle to build trust among consumers if property markets turn, he added: “When a market is tougher, that is when agents really earn their fees.”
Established estate agents have been sceptical about the group.
Henry Pryor, a London buying agent, queried the company’s valuation. “As with housing there is a world of difference between an asking price, which can be set at anything by the seller, and what you finally sell it for,” he said.
Purplebricks was launched by Michael Bruce, a former lawyer, and his brother Kenny, who together ran the high street estate agency Burchell Edwards until it was acquired by Connells in 2011.
It has 4,300 residential properties listed for sale, which it says is more than twice as many as its closest online competitor.
The corporate finance boutique Zeus Capital is acting as Purplebricks’ sole broker and nominated adviser (Nomad).
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