Property Disruptors – The Investment Play

Running a real estate agent comparison business I have a keen interest in keeping abreast of how technology is driving change in how property is transacted in Australia and around the world.

Almost every day a new start up emerges promising to disrupt how real estate is transacted or managed.

I’m constantly amazed at the number that do not appear to consider the consumer acquisition costs of the B2C product they’re developing.  They focus on building a product or service that will be so revolutionary that consumers will flock to use it or that there will be investors out there willing to fund these acquisition costs until break-even is achieved, if ever.

It hard to see any of these start-ups create real value unless they significantly shorten the time it takes to transact property or reduce the excessive costs involved.  The two prime examples are the very high online advertising costs (in Australia) and the real estate agencies who take anywhere up to 60% of the agent’s commission. These are where those with the most to lose exist.

Trying to predict which company will succeed in disrupting property is fraught with risk. I’ve been a long time fan of Warren Buffet who said during the 2000s tech boom that the smart move would be not to try and find the needle in the haystack, the next Google, Apple or Facebook, but rather to short the incumbents that were being disrupted.

In recent terms such a move may be illustrated by shorting Cabcharge when Uber entered the Australian market in 2012.

In real estate terms it may be to short Countrywide (UK) or McGrath (AU) if disintermediation and/or agent commission price pressures were expected to continue.

Purplebricks vs Countrywide vs McGrath