Proptech Weekly #55 — Zoopla, Hometrack and property data porn
FEBRUARY 01, 2017 | Rayhan Rafiq-Omar
I’m no fan of Hometrack or Zoopla’s wildly off guesstimate of your home’s value. But you have to take your hat off to Alex Chesterman for yet another share price rise inducing deal.
Friends, Feudal Landlords, Commoners,
Yesterday was yet another example of how much of a legendary entrepreneur Alex Chesterman is. No-one else in Proptech comes close.
In case you haven’t read the news: Zoopla purchased Hometrack for £125m
By way of background, Hometrack sell/license an Automated Valuation Model (AVM) to mortgage lenders in the UK and Australia.
It’s such a massive cost saving to lenders, that they happily accept the Hometrack line that “when we aren’t confident in the automated valuation, you’ll see it in a lower confidence level”.
In other words, they can get valuations wrong and still be paid for it. Genius!
Hometrack are the runaway market leaders in this space.
Many people have tried — and continue to try — to build ‘a better AVM’.
But it’s close to impossible for one very simple reason: there isn’t enough property data.
On your street, there’s maybe a handful of transactions in a decade. In your area, there’s not enough within even a single year. So how do you value what a property is worth today — with any confidence — when there is so little transaction volume to base calculations on?
Well, naturally I have some ideas. 🙂
Henry Pryor goes on and on about demand (and loose availability of credit) being a primary driver behind property price rises.
So how do you measure demand? The volume of people searching on Rightmove trended against those enquiringly about properties would be a good place to start.
You could then layer on mortgage approvals from the Council of Mortgage Lenders, spend some money paying conveyancers to provide a heads up of Land Registry entries (so you don’t have to wait 3–6 months to know a property has sold) and most importantly compare all of this to the amount of unique new listings on Rightmove.
This should provide a ratio of demand vs supply. When the ratio is in favour of supply, as it is now, you’re in a buyers’ market and price growth will be slower. If — as in the first half of 2014 — demand was outstripping supply of properties for sale, you’ll see more property selling for above asking price.
And that’s what is wrong with current AVMs like Hometrack’s: an over-reliance on asking price, coupled with ‘too clever’ statistical models.
Nested, Placemake.io, Rummage4 and many more all have an eye on building a better way to automatically value property. Their founders — Matt Robinson, Nikhil Vadgama and Robert May — are all highly intelligent. You’d bet on them getting it right.
So why haven’t they? Why is Hometrack pretty much unopposed — even Rightmove hasn’t successfully won much business off of them.
That’s why Zoopla and Alex Chesterman have pulled a rabbit out of a hat — if you can’t beat them, acquire them.
All that data is worth something. You only need look at the excitement — and money — surrounding Opendoor in the US.
Zoopla may trail Rightmove in terms of revenue and eyeballs, but they lead by a country mile thanks to brand recognition and SEO (high ranking when searching on Google). There’s one single reason for this: their use of data.
Millions of pages with lots of fascinating data points makes for a compelling argument that ‘Smart’ people go to Zoopla. Maybe the same goes for Proptech entrepreneurs looking for a trade sell exit.
One last tidbit for those that missed it — Alex Chesterman eluded to another acquisition in the works according to Techcrunch’s reporting. Any guesses on who is next?
