The residential real estate sales industry internationally is increasingly being re-organised into two different and separate types of business models and customer offerings in specific market segments with a third, totally technology-driven model gaining traction in the low end of the market, said Dr Andrew Golding, chief executive of the Pam Golding Property group.
“It is too early to tell with any real accuracy what the long-term effect will be of the newer modalities as they have yet to really gain a dominant foothold in any market,” said Golding, identifying the three models as the “bespoke” traditional service model, the hybrid agency model and a technology-driven model that allows buyers and sellers “to engage solely through a technology platform without any agent involvement”.
“The so-called ‘bespoke’ service model is the traditional high ‘touch’, high service, strong agent/client relationship model which is the cornerstone of the Pam Golding Property group which will continue to be our core offering,” he told HomeTimes. “The ‘hybrid’ estate agency model comprises a digital offering with less agent hand-holding but importantly still continues with agent involvement.
“The hybrid agency model has a technology platform that enables buyers and sellers to conclude real estate transactions, including book valuations, change prices, arrange viewings, collect feedback, review marketing data, send messages, make offers and agree sales 24/7. This model – which we have introduced in South Africa via our investment in Eazi.com – uses technology to reduce costs and pass savings onto consumers in the form of lower, flat fees.”
Enlarging on the future of the three business models, Dr Golding says that a view “being widely expressed internationally is that there could be applicability for the pure technology model in the lowest end of the market, some traction for the hybrid model in a price segment above this in the so-called mid to lower end while the consensus view is that the traditional model will continue to dominate the market above this. Time will tell if this segmentation is correct.
“Internationally, the hybrid model has started to gain traction and has specific applicability in the lower end of a number of key markets around the world where it is estimated that it has the potential to become a significant sales modus operandi in the future,” he says. “We believe our investment in Eazi.com broadens the group’s access to the South African and African residential property sector by enabling us to take an interest in the high-volume segment of the market, which comprises over 100,000 transactions annually in South Africa alone. This is particularly relevant in the price segments between R500,000 and R2m, to which the Pam Golding Property group has traditionally had limited exposure to date.
“This investment in no way detracts from the personal and professional service and high agent involvement of our existing Pam Golding Properties offering. This is not a disintermediation or cannibalisation play but rather a recognition that in specific market segments it is possible to give consumers a choice between a low-cost, fixed-fee, low-agent-involvement, technology-enabled online service or a traditional agent-enabled, high-touch, personal service with all its inherent advantages.”
Golding says Eazi.com has a well-thought-through online, scalable platform and a sound business model. The Cape Town-based, technology-enabled, fixed-fee service with call centre support enables consumers to buy and sell residential property for a fixed fee of R29,500 plus VAT payable on the sale of the property.
“While Eazi.com is currently focused in the Cape Town Metropole and will continue to be managed and branded separately from Pam Golding Properties, given the international trends in real estate we are confident that the two models will co-exist successfully and enable us to expand the full service offering of the Pam Golding Property group locally, nationally and globally.
“There is no doubt that technology will continue to play an ever increasingly significant role in the residential real estate industry and as a consequence the role of the agent continues to evolve but certainly, for now, the traditional agent model has a value proposition which continues to be compelling in many ways.”
He points out that the residential real estate sale “is very seldom simply a linear transactional process. It is often characterised by complexities that require the experience, wisdom and insight of a real estate professional to navigate what is often a protracted journey. The purchase or sale of a property is usually at least a six-month process from start to finish and can often be complex, is frequently nuanced and is usually the single biggest transaction clients undertake.”
Words: Blake Wilkins