Purplebricks announces it’s quitting Australia
Online real estate outfit Purplebricks has announced it will quit the Australian market after a tumultuous six months, and acknowledged its global expansion was “too rapid”.
The Australian arm of the British-founded company will close its operations after two and a half years of attempting to crack the property market down under.
Purplebricks Group chief executive Vic Darvey on Tuesday afternoon said it was a difficult decision to close the Australian business.
“Unfortunately, we have been unable to make the progress in the Australian market that we’ve wanted, despite the tireless efforts of our employees,” Mr Darvey said in a statement.
“This is not a decision we have taken lightly, but with market conditions becoming increasingly challenging, we do not believe that the prospective returns in Australia are enough to justify continued investment.”
In a statement, the company said: “With hindsight, our rate of geographic expansion was too rapid and as a result, the quality of execution has suffered. We have also made sub-optimal decisions in allocating capital. We will learn from these errors and will not make them again.”
Mr Darvey was appointed only today after former chief executive and company founder Michael Bruce quit. Mr Darvey was appointed chief operating officer in January.
The company has been marred with negative reports about its agents’ fixed fees, allegations of pressuring vendors to lower their asking prices and of a toxic culture within the business, and its share price crashing to a two-year low.
Mr Darvey said the company would take no further listings in Australia but intended to engage with its current customers to finalise all existing agreements.
“They seem to have entered at the worst possible time with sales at or near record lows,” said Domain economist Trent Wiltshire. “It’s a tough time for all agents, especially newcomers.”
“They would have started to build some market share just as things turned, particularly in Sydney in mid-2017.
“They entered at the peak and from then, prices and sales have started to fall. They timed it very badly.
“Their business model is probably not suited to a slow market. It might work quite well in a booming market.”
Purplebricks’ share price in the UK slumped 8 per cent in early trade, the BBC reported, after news of Mr Bruce’s resignation broke.
The company has also reported that it will put its US business under review, but in Canada, it is performing well.
Purplebricks had its major success in the UK, where it remains optimistic.
“Whilst the UK property market remains challenging, the company continues to outperform the market and the board remains confident about the future of the business,” the company said in a statement.
The BBC further reported that Purplebricks cut its sales forecast in February, putting further pressure on its performance.
“We are very conscious that the group’s performance has been disappointing over the last 12 months and we sincerely apologise to shareholders for that,” the company said in a trading update on Tuesday.