The Purplebricks effect: LJ Hooker launches DIY disruptor

Posted by Simon Dehne on March 1, 2017 in Latest News with No Comments


Australia’s second biggest real estate group, LJ Hooker, has taken on the wave of disruptors eating into estate agents’ income, by becoming a disruptor itself.

In a move that will see the 88-year-old company undercut the commissions of its own 8000-strong real estate network, LJ Hooker’s new online-focused Settl business will empower vendors to sell their homes by themselves, in exchange for paying a low fixed fee.

The DIY business, which will be run as a stand-alone entity, will include the assistance of a Settl estate agent if required for services such as open-for-inspections and auctions.

LJ Hooker chairman Janusz Hooker, the grandson of founder Sir Leslie Hooker, likened the launch of Settl – which comes out of its proptech incubator LJX-Labs – to when Qantas created low-cost carrier Jetstar to service a different market segment.

“These will be two brands – LJ Hooker and Settl – serving two distinct customers,” Mr Hooker told The Australian Financial Review.

Mr Hooker said Settl would cater to the needs of millennials and “digital natives” who wanted to “pay less and do more themselves”.

But he was adamant that there remained a strong future for the traditional high-street model, where vendors pay a commission, typically between 1.5 and 2 per cent of the selling price.

“Part of the market still wants to fly Qantas, but there’s a new market that wants to fly Jetstar. We’re creating a new market – it’s not a zero sum game. The launch of hybrid real estate businesses has increased the size of the market,” he said.

Many in the industry will see the launch of Settl as a direct response to the arrival in Australia six months ago of highly successful low-cost British operator Purplebricks, which has cut thousands of dollars from home selling costs by charging a fixed fee, and the growth of commission-free DIY platforms like buyMyplace.com.au and forsalebyowner.com.au.

In contrast, listed high street agent McGrath has lost about 70 per cent of its value since floating with listings down by a fifth. LJ Hooker canned a $400 million IPO last month after the McGrath float flopped.

Mr Hooker said LJ Hooker was holding its own on commission rates and would not tarnish its full service offering by reducing them. “We don’t have policy of going down to zero,” he said.

He also played down talk in the industry of disruption. “It’s a hyped-up word. We’re meeting consumer demand by doing things in a different way. We’ve been in this business 88 years and we’re continuing its pioneering heritage.”

Pricing for Settl has not yet been revealed, but is expected to be in line with other DIY offerings in the market when it goes live in the second quarter of the year.

Josh Rowe, CEO of property price prediction app realAs.com, backed the new LJ Hooker venture.

“A company that is not prepared to cannibalise their own business to meet customers’ changing needs will eventually fail,” Mr Rowe said. “Netflix was originally a DVD mail order business with 20 million users at its peak. Now as a streaming service it has 99 million users,” he said.

“Perhaps LJ Hooker is the Netflix of real estate in Australia.”

Read more: http://www.afr.com/real-estate/residential/the-purplebricks-effect-lj-hooker-launches-diy-disruptor-20170227-gum2lb#ixzz4a4apjxVT
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