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According to the latest Halifax House Price Index, mortgage approvals are at a 13-year high and the housing market “continues to be shaped by a desire for more space, the move from urban to rural locations and indications of a trend for more home working in the future.”
That should spell good news for the likes of online property portal Purplebricks Group (PURP), which is due to post results for the first-half of its 2021 financial year on Tuesday.
The reopening of the property sector, not to mention the stamp duty holiday, has meant pent-up demand unleashed since the Spring lockdown has seen sales booming, with sellers racing to sell and space-seeking buyers snapping up everything that’s on offer.
And that’s very good news when your sole set-up is a website posting a large number of these properties for sale. Giving an update a month ago, Purplebricks said that, as a result, interim underlying earnings were likely to top previous earnings guidance given.
And it is a big turnaround from where it was in March when it warned that revenue for the year to April was likely to come in below expectations, because of the pandemic. Back then it did not go so far as to predict what the impact of the outbreak would be on its 2021 financial year results, but it swiftly introduced cost saving measures, including reducing supplier costs and overheads and suspending all TV and radio advertising, while reducing spending on online advertising.
The group said it has seen “strong levels” of new instructions in the five months to the end of October and now expects an 8% increase in first-half instructions to 35,387. That would mean instructions jumped by 20% in the five months since June. And, as a result, underlying earnings for the first half are set to be “comfortably ahead” of the £3.5 million forecast earlier in the year.
As a business model, Purplebricks appears to have been perfectly suited to the lockdown scenario. The company set out to transform the home buying and selling process and the first lockdown was a prime time to really put to the test its digital house-selling model and also buyers’ and sellers’ appetite for it.
According to the company, it recently conducted a survey of 2,000 homeowners and came away with a “fascinating” look at the evolution of sales and the ‘new normal’. It turns out that some 42% of users are now prepared to use an app to help manage the entire sale of a property. A third of house hunters use Google Street View to scope out a new neighbourhood. Even how we communicate in a chain has evolved, with almost half of those interviewed saying they would prefer to communicate with their solicitor and estate agent through electronic means and one in 10 being happy communicating with their solicitor and estate agent over WhatsApp when trying to get a house move over the line.
And this trend is not specific to London or other major cities. Purplebricks says virtual viewings are most popular in Scotland, London and Yorkshire with other regions like Wales and the South Coast also seeing double-digit increases in bookings. And sellers in the North East have increasingly taken to the app to help manage the sale of their properties.
Technology is clearly now a part of how we buy and sell our homes. Generally, more than four in 10 homebuyers have increased their use of technology in 2020, according to the Purplebricks survey and 87% of people say they would be willing to embrace technology when it comes to searching for a home in the future.
Purplebricks’ positioning and the opportunities that have opened up to it during the pandemic, certainly haven’t passed investors by. Its shares have risen by more 10% over the past month and are currently trading around the 67p mark. Please remember past performance is not a reliable indicator of future returns. They are well above the 22p low they sank to when the pandemic forced the first lockdown, but still a hefty 50% lower than they were at their 52 week high of 134p, seen at the very start of 2020.
Analysts following the stock seem to think there are reasons for it to continue to climb in the year ahead, with UBS and Peel Hunt rating the shares a buy. And indeed, nine months on from the start of the pandemic and the doomsday predictions, it is a different picture again for the property market.
However, while the pandemic has failed to bring about the negative scenario initially feared, that is not to say dark clouds do not have the potential to form just over the horizon. With the pandemic ongoing, Brexit and the end of the stamp duty looming, all eyes will be on Tuesday’s update for more on the outlook ahead and Purplebricks’ prospects going forwards.
More on Purplebricks
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