BREAKING PROPERTY NEWS – 21/10/2021
Daily bite-sized proptech and real estate news in partnership with Proptech-X. Today, Stanton looks at the class action case against online estate agents and the UK House Price Index
Millions in back payment may be due to workers. Is it the end for online agents?
There has been much written over the years about online agents, especially Purplebricks, the largest agent by market share. Many online companies have shuttered, and although technology would seem to be the way forward, online agents only hold around 7% of the property market share in the UK.
The big news rocking this sector though is that a legal outfit Contractors For Justice (C4J), has seen the opportunity surrounding the HMRC’s IR35 contractor regulation debacle. And is looking to put a class action lawsuit together for all the workers past and present who work for online agents but are not directly employed.
It is felt that if the action gets to court millions of pounds will need to be refunded to people who thought they were not employees, but now find they were.
These workers will inevitably look to their employer to pay the monies owed to them, and of course, there will potentially be a huge amount due to HMRC plus interest. As yet nothing has been decided one way or the other, but it is telling that after many years Purplebricks pivoted its model from having Local Property Experts who ran their own limited companies – yet solely worked for Purplebricks – to a normal PAYE employed model.
Of all the onliners, only Purplebricks has made a profit; £6.8 million for the current accounting period. Having made losses of £19.2million, £54.9million, £30.08million, and £3.01million in the last four years, totalling a £107.9 million loss.
The significance of an Uber-style upset, where it is ruled that setting up a limited company does not let a big corporation escape the burden of the HMRC requirements, will be a blow to all of the cash strapped onliners who rely upon continued rounds of investment to keep them afloat.
At present, the Purplebricks share price on the Alternative Listed Market is 57.5p, down from 525p in 2017, and even down from its original listing price of 95.5p.
It may have around £70 million in its war chest, but if it gets stung with a huge multi-million bill, and has to now pay for its newly recruited full-time sales force, things will be tight.
Add into this mix it is now refunding fees if it does not sell property, and its annual multi-million media spend to keep it in the public eye, its financial runway could be eaten through in less than 19 months.
The bad news for the other onliners, like YOPA, Strike, Doorsteps, etc., who may or may not have a similar gig economy model, is if the class action is a win for workers, do they have sufficient funds to cover any deficit? If the answer is no, and they also now need to pivot and employ everyone on a PAYE model, would now be a more prudent time to close the online businesses down?
The good news for the solicitors is they are on a great gravy train, asking for £250 upfront from people who feel they may be due compensation, plus 25% of any settlement or 40% of any settlement should the action win.
House prices continue to rise according to UK House Price Index
The headline statistics from the HM Land Registry intel says that in August:
- The average price of a property in the UK was £264,244.
- The annual price change for a property in the UK was 10.6%
- The monthly price change for a property in the UK was 2.9%
Reacting to this information the Director of Benham and Reeves, Marc von Grundherr, commented: “Yet further proof that the drop in property prices following the initial stamp duty holiday deadline was merely a pause for breath in an otherwise marathon run of positive market momentum.
“There’s little sign of this letting up and should an increase in interest rates materialise, the likelihood is that it will be fairly palatable for the average homebuyer. Therefore, we don’t expect it to have any notable impact on the nation’s insatiable appetite for homeownership and the market should continue moving forward at pace well into next year.”
Managing Director of Barrows and Forrester, James Forrester, commented: “The current state of the market is quite remarkable given what we’ve been through as a nation since the start of last year. Employment and wage growth have remained firm, mortgage affordability is still hovering around record lows and house prices continue to climb ever higher.
“As a result, buyers continue to mob the market and while an interest rate hike is on the horizon, we expect these factors to continue to stimulate positive house price growth for the remainder of the year.
“Forget about a shortage of HGV drivers, we need more estate agents to get us through until Christmas.”
Founder and CEO of GetAgent.co.uk, Colby Short, commented: “A continued shortage of stock has seen the ball lie increasingly within the court of the home seller, as buyers fight it out to secure their ideal home.
“As a result, buyers entering the ring can expect some stiff competition that will see them pay close to asking price, if not more, in order to come away victorious.
“The best plan of attack is to be ready to act at a moment’s notice and if you are a cash buyer, ensure the seller is aware that you sit in a far more favourable position.”
With the Chancellor’s budget on the 27th of October and the Bank of England talking of raising interest rates, it will be an interesting last quarter of 2021 for sure.
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