u|Chief asked Marcel du Toit, the cheeky young disruptor of the property industry (and CEO of Leadhome), about the shape of the local industry… and what gave Leadhome their edge to enter an already crowded market.
What do you see as the shape of the local property space and why do you believe it is in such desperate need of a shake-up?
The traditional franchise estate agencies’ market has not adapted for years. The industry is changing and we believe their share will be severely eroded. The current asking commission of 5%-8% is unsustainable, and only this high because of the inherent costs built into that business model – after all, the franchisor, franchisee, and estate agent all have to get paid from the commission of each sale, which is what drives these unjustifiably high commissions.
“The current asking commission of 5%-8% is unsustainable, and only this high because of the inherent costs built into that business model.” – Marcel du Toit.
Unproductive cost elements from which clients derive no value, such as expensive offices for each franchise (who goes to see an estate agent at an office to look for a property these days?), branded cars, and newspaper advertising (even though more than 90% of buyers come from online channels today), will be rightly viewed as wasteful expenditure and cut from budgets.
Secondly, technology will distinguish successful agencies. The residential industry’s investment in tech has lagged far behind other industries, which provides a great opportunity for companies like Leadhome to differentiate ourselves and re-imagine the way consumers interact with our service and product.
Why did you launch your cheeky new advertising campaign… and what were the challenges of creating it just right?
Consumers’ trust with estate agents is particularly low in South Africa. This is due to many factors, namely industry corruption, small players that are in it for the short-term, as well as commission models that create a conflict of interest among agents and are disservice to the client. People have many stereotypes regarding estate agents and we wanted to play into these hyperbolic stereotypes in a humorous way to shine a light on the fact that the industry is in need of drastic change. We acknowledge this and are working hard to gain the respect and trust of our clients by changing the way the current model works.
We don’t ask our clients to trust us but, rather, we work at earning their trust through creating a more convenient and transparent service at a fraction of the cost. We provide our clients with a sense of ownership and transparency over their sale. We provide them with real-time dashboards to monitor the performance of their properties as well as an agent to support them so that they feel more confident and self-assured in dealing with the sale of their house.
“The industry is in need of drastic change. We acknowledge this and are working hard to gain the respect and trust of our clients by changing the way the current model works.” – Marcel du Toit.
How does the South African market compare to the rest of Africa as well as the international market?
From a macro perspective, property is the same wherever you go – I think it’s an inherent human trait to want to own a bit of land where you can base yourself, raise a family, and pursue your dreams from.
From a process perspective – how we buy and transact – we’re very similar to the United Kingdom, Europe, and Australasia, where the majority of buyers find properties online (mainly through property portals similar to Property24), book viewings after sending through enquiries, and negotiate the sale with an estate agent acting on behalf of the seller.
What South Africans look for in properties are different from other countries and vary widely from province to province. In Gauteng, for instance, the two dominant types of properties buyers are interested in are either a large stand with space, or a townhouse in a secure environment.