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Purplebricks issues profit warning as homes for sale run low

Shares in online estate agent Purplebricks fell more than 30 per cent on Thursday as the company issued a profit warning and said it is running low on homes to sell thanks to sky-high housing demand.

With demand for new homes outstripping supply, the company said it expected to be instructed on 22,000 property sales in the six months to October 31, down almost 40 per cent from the 35,387 it was instructed on in the same period a year earlier.

Shares in the company plunged to 36p in early London trading on Thursday, down 31.6 per cent from 52.60p on Wednesday. They have tumbled more than 66 per cent this year.

Properties are still selling fast, said Vic Darvey, the company’s chief executive, but “the reduced amount of stock coming to the market is proving challenging”.

The housing market has been red hot since May last year, with demand for larger houses, homes with gardens and countryside properties spiking, driven partly by an increase in working from home.

With demand continuing to run above historical levels, there is evidence that the stock of homes for sale is beginning to dwindle — one factor, alongside a possible interest rate rise, which analysts have said could cool the housing market.

Purplebricks has had to absorb increased staff costs thanks to a shift in the status of the estate agents it recruits. Purplebricks agents have historically been self-employed, but this year the company said it would move them to full employment contracts.

As a result of fewer instructions and the costs of shifting to a full-employment model, Purplebricks said it expected operating profits to be lower than it had previously guided.

On the back of the latest guidance, analysts at Peel Hunt said they expected Purplebricks to post a pre-tax loss of £12.4m for the current financial year, having previously forecast a £1.2m profit.

The company is also facing the prospect of legal action from hundreds of current and former estate agents who were classed by Purplebricks as self-employed. They believe that, despite their formal status, they acted as employees and are therefore entitled to holiday pay and pension contributions.

The company bringing the claim, Contractors for Justice, has estimated that each agent could be in line for thousands of pounds if they win and that the total bill for Purplebricks could run to tens of millions of pounds.

Purplebricks has denied that its self-employed agents were more akin to full-time employees, saying that they each ran their own businesses.

The Aim-listed company, which charges a flat fee to market properties, is the UK’s largest standalone agency brand, responsible for around 5 per cent of UK sales last year.

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