Real estate agency Purplebricks recently announced that it would quit Australia after experiencing six hectic months and eventually acknowledging its “too rapid” global expansion.
The shutdown is happening after less than three years of operations in the country.
“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,” the firm said in a statement.
Closing the business was a difficult decision, according to Purplebricks Group Chief Executive Vic Darvey. “Unfortunately, we have been unable to make the progress in the Australian market that we’ve wanted, despite the tireless efforts of our employees,” 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.”
Darvey was appointed on Tuesday after Michael Bruce, former chief executive and company founder, stepped down. Darvey was appointed chief operating officer in January.
Purplebricks has earlier posted an $18 million interim loss for the six months to October given the then increasing concerns on its business model in the country.
There have also been negative reports about the firm’s agents’ fixed fees, allegations of pressuring vendors to lower their asking prices and of a toxic culture within the business. In addition, its share price dropped to a two-year low, according to a report by Australian Financial Review.
Darvey said the agency would not accept listings in Australia anymore but will reach out to 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.”
The company disclosed that it would put its US business under review. Canada operations, meanwhile, are doing well. Purplebricks had its major success in the UK, where the outlook remains positive.
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