Will competition in the online estate agent market reduce costs?

If there is one industry which was very quick to recognise the potential of the Internet it was the property/real estate market. When it became obvious that the Internet was here to stay, that it would be in homes around the world in a relatively short space of time and in theory it was cost effective compared to traditional estate agent outlets, it became something of a no-brainer. Some of the early entrants to the market such as Rightmove and Zoopla have certainly done very well and continue to go from strength to strength. However, is competition in the online real estate market set to reduce costs for buyers and sellers?

It would be wrong to suggest that the online property market is struggling, that margins are wafer thin and business is falling away, but there is no doubt that a number of high-profile stock market flotations and new entrants to the market are putting the industry under the spotlight.

Competition breeds competition

The simple fact is that where you have literally millions upon millions of customers each and every year, competition will breed further competition. We will see some of the weaker participants fall by the wayside, we could see costs reduced significantly and it is highly likely that we will see some form of consolidation in due course. The UK is home to an array of well-known property portals such as Rightmove and Zoopla as well as a new entrant in the shape of Agents Mutual having recently raised £6 million in seed capital.

Quote from PropertyForum.com : “A worldwide real estate market is now more accessible than ever before, information is readily available on the Internet and professional investors continue to grab the headlines. However, sometimes it is easy to forget that not all real estate investments are purely driven by money as more and more people look to pastures new….”

While there is more than enough business to go round, it seems that Agents Mutual could be about to shake up the sector with backers such as Savill’s, Knight Frank and Strutt and Parker. It will be interesting to see how this particular venture develops, whether it can take significant market share from the current leaders and whether indeed we see a reduction in overall costs for buyers and sellers.

Traffic is key

The simple fact is that traffic to any one website is the key to success, it brings in advertising, improves the company’s profile and success breeds success. It will be interesting to see how the major players in the UK online property market plan to maintain their connection with customers, increase their traffic going forward and protect their profitability. It seems like a no-brainer to suggest that more major competition in the sector will reduce margins but there may be other elements which online participants can tweak to maintain their profits going forward.

There is a suggestion that some of the major players such as Rightmove and Zoopla took advantage of the recent surge in the UK property market to increase their profile. Indeed Zoopla is expected to float on the stock market this year, placing it in the same public arena as rival Rightmove, we await the terms of their offer. The problem is that once you move into the stock market arena, shareholders will expect year-on-year profit increases, significant investment will be required and competition will come into play.

It will be interesting to see how the online property market performs in the short to medium term and indeed whether we see further consolidation in the future.