It's been a difficult year for traditional estate agents, but investors are flocking to the online newcomer, says Ben Judge.
For estate agents, times are tough. The uncertainty after the EU referendum result and the rise in stamp duty have both affected the housing market, especially in London. Countrywide, which runs Britain's largest chain of residential estate agents, has had a terrible few months, issuing a profits warning, closing branches, and seeing its share price slide by more than 50%.
Foxtons, the London-focused estate agent everyone loves to hate, also warned on profits as the higher end of the market slowed, and has seen its shares fall by over 40% in the last year. Other firms, such as LSL Property Services and Winkworth, have shed around a third of their value.
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But for newcomer Purplebricks, founded in 2014 and backed by superstar fund manager Neil Woodford, it's a different story. Purplebricks bills itself as a "hybrid" agent, with an online platform backed up by local "property experts" on the ground, but no high-street shops. Unlike other agents, it does not charge a percentage of the property's sale price. Instead, it levies a flat fee £849 outside London and £1,199 in London whether the property sells or not. The planned ban on letting agents charging tenants upfront fees is unlikely to have "any meaningful impact" on revenue, the company said.
In the six months to 31 October, revenues rose by 159% to £18.3m, compared with £7.2m for the same period the previous year. The number of new instructions it took rose by 108%, and it completed on £2.6bn of property transactions, compared with £2.8bn for the whole of the previous year.
It is still not yet profitable in the UK, but is getting closer, making a loss before tax of £0.3m for the first half of 2016/2017, compared with a loss of £6.4m for the same period the previous year. It's also expanded into Australia, launching in Brisbane and Melbourne, where it made apre-tax loss of £2.5m on revenue of £0.4m.
But its business model is not beyond reproach, and the firm has been criticised for the lack of clarity of its financial reporting. "What really fires certain analysts up," says Elaine Moore in the Financial Times, "is the niggling question of just how many houses are being sold." Purplebricks says there is no mystery: it has sold everything it says it has sold, and the proportion of instructions converted to "sale agreed" is 78%. That would be fine, says Moore, "if we didn't have a more exacting definition of the word sold' that involves contracts and exchanges of money and keys".
Investors are, nevertheless, encouraged. After hitting a peak in May, the share price fell steadily over the summer, but has bounced by almost 40% since the company reported its interim results on Monday, and has now risen by more than 50% in the last year.
FCA crackdown hits spread-betting firms
Spread-betting firms saw more than £1bn wiped off their market value this week after the Financial Conduct Authority (FCA), the UK's financial services regulator, announced new rules for the industry. Shares in IG, the UK's biggest spread-betting firm, fell more than 38%, while CMC Markets fell by 35%, and Plus500 lost 30%. Spread betting involves speculating on short-term market movements. Clients often employ "margin", meaning that they only put down part of the value of their position, borrowing the rest from the spread-betting firm.
The FCA says it has "serious concerns" that more and more people use margin with little understanding of the risks it carries. This could lead to "rapid, large and unexpected losses". The FCA's sample of spreadbetting customers found that 82% had lost money. That "might not be a problem if their products were being sold as a form of leisure", like having a flutter on the horses, says Simon Goodley in The Guardian. But spread betting is "nowhere near as much fun" and vastly more complicated.
Hence the FCA wants firms to cap clients' leverage (the amount of borrowed money they use) at a maximum of 50 times their capital, with lower limits for clients with less than 12 months' experience. It will also ban introductory and other bonuses that encourage clients to trade, and force firms to disclose details of ratios of profits to losses among their clients.
Insurer Prudential is the corporate equivalent of a couple with "one amusing member and another who is a black-belt in buzz-kill", says Jonathan Guthrie in the Financial Times. If it didn't have its "heftily built annuities division in tow", droning on about its "rugby induced groin-strain and the traffic jams" on the way to the party, it would be "Miss Conviviality".
Luckily for corporate partygoers, Clare Bousfield has joined as head of insurance, fresh from ridding rival insurer Aegon of its own annuities ball and chain. Her arrival has prompting speculation that the Pru could finally "ditch its £45bn annuity book", releasing "£6bn-£7bn of capital".
We're well into the 21st century now and yet we are still waiting impatiently for the flying cars that science fiction promised us. "Pleasingly, though," they "came a step closer" after Munich-based Lilium Aviation, which is "trying to develop a pint-sized plane", raised €10m in venture-capital funding, says Emma Haslett in City AM.
Lilium hopes its electric-powered "Lilium Jet", which can take off and land vertically, will herald a "completely new way of commuting". However, Paul Sawers on VentureBeat.com notes that the plane "remains a prototype for now", along with every other revolutionary flying car.
Rag-trade magnate Philip Green is advertising for one of the most unenviable jobs around, says the Dastardly Mr Deedes in the Daily Mail. Green's Arcadia Group is looking for a head of press. Given all the flak that Green has drawn over the failure of retailer BHS, it's no surprise that the successful candidate, who will be handling "external communications during crisis situations" must be "resilient under pressure", with a "positive attitude" and a "strong network of senior-level media contacts". The lucky recruit will get all the standard employment benefits, plus, intriguingly, "a special treat when you join us".
Ben studied modern languages at London University's Queen Mary College. After dabbling unhappily in local government finance for a while, he went to work for The Scotsman newspaper in Edinburgh. The launch of the paper's website, scotsman.com, in the early years of the dotcom craze, saw Ben move online to manage the Business and Motors channels before becoming deputy editor with responsibility for all aspects of online production for The Scotsman, Scotland on Sunday and the Edinburgh Evening News websites, along with the papers' Edinburgh Festivals website.
Ben joined MoneyWeek as website editor in 2008, just as the Great Financial Crisis was brewing. He has written extensively for the website and magazine, with a particular emphasis on alternative finance and fintech, including blockchain and bitcoin. As an early adopter of bitcoin, Ben bought when the price was under $200, but went on to spend it all on foolish fripperies.
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