Online estate agent Purplebricks (PURP:AIM) is looking to build on its initial step into the US in California by targeting the New York market.
The plan is to launch in the second quarter of 2018 and the company is currently recruiting local experts and has set up an office in Manhattan.
Although it will have to tailor its approach to reflect the differences in the US real estate market, the basics of its approach, which have proved successful at disrupting the UK market, remain the same.
Simply put, the company offers an online service backed by local property experts. It can be very competitive on price because unlike traditional agents it doesn’t have a network of offices to maintain.
WHAT IS THE POTENTIAL IN THE US?
We examined how the company might approach the US opportunity in this article, published ahead of its launch in Los Angeles in the autumn.
The share price rises 2.4% to 435.2p on the back of the New York announcement.
Investec analyst Steve Liechti raises his share price target from 450p to 475p, being the level at which he believes the shares will hit over the next 12 months.
‘Planned new US launch in the New York region looks a positive affirmation of Purplebricks’ experience so far in the country post the initial bridgehead in California (Sept 2017),’ he says.
‘Also, we would say this is a relatively low-risk new launch given its experience and infrastructure in the region already. We see material opportunity in the US, though allocate only a modest value in our sum-of-the-parts valuation currently.’
WHY NEW YORK?
New York has high property prices and high commissions for real estate transactions. There are 7.4m householders and 20m+ people living in the metropolitan area.
Average property prices are $561,000 versus the US average of $276,000, says Investec. Transaction volumes are approximately 130,000 per year which is smaller than California but skewed to higher value properties.
Purplebricks has so far launched in four California territories, as well as having operations in the UK and Australia.
