Will growth of property tech signal the death of the estate agent?

Property tech is hotting up. But does the rise of online real-estate platforms mean the death of the cornerstone of the sector — estate agents?

Earlier this month online estate agency PropertyFox announced that it had acquired fellow Cape Town based property platform Steeple for an undisclosed sum. It follows the announcement last month by Pam Golding Properties that it had acquired low commission agency Eazi.com.

The rise of property tech in South Africa follows the sector’s growth in the US. In April US tech publication Techcrunch reported that real estate platform Zillow had launched a new strategy of buying and selling homes directly to users.

This, while online real-estate company Opendoor claimed in June to be valued at $2-billion following a $325-million funding round, according to Reuters.

Property tech platforms will result in a thinning of estate agents in the market, says SA entrepreneur

What then does this hold for the estate agent, which has always held a key role in the property sector?

In South Africa, Property Fox, which was launched in 2016 by Crispin Inglis and Ashley James, already allows buyers and sellers to meet without the need for any agent.

The company takes care of all the administration work for the buyer – things like conducting a valuation of the property, photographing the property and advertising it on other property portals and arranging for buyers to view the property by sending notifications to both buyer and seller.

Property Fox’s average sale is about R2-million to R3-million. One in four sales are concluded within a month.

Inglis is pretty confident. “We think that there will be a big shift in the next two to three years towards platforms like ours,” he told Ventureburn earlier this month.

He points out that while commissions on property sales by estate agents average five or six percent in South Africa, they’re at the two-percent mark in the UK. For him it means there’s a lot of opportunity for platforms like his to offer sellers a better deal — without agents.

Inglis says when he and James started out they were warned by others that it was bad idea to get buyers and sellers to meet, as it introduced emotion into the transaction. Inglis says doing so has however added a certain degree of transparency to each transaction.

Will reduce part-time agents

For entrepreneur Shaun Minnie – who sold his tech platform Eazi.com, to Pam Golding earlier this year for an undisclosed sum – tech platforms will reduce the number of part-time estate agents in the sector.

The sector in South Africa and the US, he believes, has “way too many” estate agents. Many he points out are part-timers that sell only about six properties a year and are happy to get by on commission of six percent per sale.

“There will be a thinning of estate agents in the market,” says Minnie who started the company in 2016 with Grant Leigh.

The platform helped consumers to buy and sell residential property around Cape Town for a fixed fee of R29 500 plus VAT which is only payable on sale of the property.

Minnie says his understanding is that Pam Golding now aims to take the platform and roll it out nationally.

‘Still role for estate agents’

But Pam Golding Property group CEO Andrew Golding believes it is “too early” to tell with any real accuracy what the long-term effect of technology platforms will be on the sector. He doesn’t believe estate agents are going to be totally replaced by tech platforms.

He says three types of offerings appear to be emerging — one that relies on the traditional use of estate agents, a second which is a kind of “hybrid” estate-agency model, made up of a digital platform and an agent, and a third where buyers and sellers engage solely through a tech platform.

“A view being widely expressed internationally is that there could be applicability for the pure technology model in the lowest end of the market, some traction for the hybrid model in a price segment above this (the so-called mid to lower end) while the consensus view is that the traditional model will continue to dominate the market above this – time will tell if this segmentation is correct,” he said.

Quality or quantity

But Golding says while property portals can drive quantity, he questions whether they also help drive quality transactions.

“Any top-producing professional estate agent will tell you that they would far rather have fewer yet more qualified buyers than more unqualified buyers.

“It is therefore integral to an agent’s service that their personal network has the ability to access the right buyers for a property and that these buyers are then strategically managed to ensure the most lucrative offer is brought to the benefit of the seller,” he says.

Seeff national marketing manager Ted Frazer echoes this. He says while certain sectors such as paid parking areas have seen the doing away of people handling transaction, certain sectors that are more “complex, multifaceted and financially significant”, such as real estate will require an experienced advisor to play a role.

The jury it seems, is still out on the future of the estate agent.

Read more: SA startup PropertyFox acquires local platform Steeple for undisclosed amount
Read more: Eazi.com co-founder plans to relocate to US following Pam Golding deal [Updated]
Read more: SA Home Loans acquires 49% stake in PropertyFox
Read more: Cape property startup creates storm with new model that outfoxes competition
Read more: Property Fox saves customer R93 000 on first property sale

Featured image: geralt via Pixabay