Online estate agent Purplebricks’ shares plummeted following a trading update highlighting a drop in supply in the market.
In an update on Thursday, the estate agent said for the six months ended October 31, the market had been “challenging.”
Its share price dropped more than 35 per cent on Thursday morning.
“New instructions have slowed significantly in recent months, given continued strong demand across the housing market is not being met by sufficient supply of instructions,” the update said.
The imbalance meant new instructions coming to market were around 23 per cent below the comparative period last year.
The group said it had invested in its business model and introduced new pricing. It was starting to see encouraging progress across both conversion rates and ancillary attachment rates, PurpleBricks said.
It expected to report a reduction in instructions for the six-month period of around 22,000, compared to 35,387 in the first half of the year.
Its cash position as at October 31 was approximately £58m, compared to £75.8m at Octoebr 31 2020.
The estate agent said it reflected “significant investment in digital, non-recurring costs incurred in managing the business through the pandemic and one-off exceptional costs in transitioning to a fully-employed model.”
Vic Darvey, CEO, said: “Following a stronger period for instructions last year, supply in the market has fallen as we slowly adjust to a below normal level of activity following a period of successive lockdowns and the end of the stamp duty holiday.
“Our service proposition remains strong and compelling, with properties selling quickly, but the reduced amount of stock coming to the market is proving challenging.”
The CEO added: “We are encouraged by the early results we are seeing on the ground and whilst they are not yet reflected in the overall group performance, we are confident in the strategy and that we have developed a strong platform for growth as activity levels pick-up.”
Russ Mould, AJ Bell investment director, said: “After setbacks overseas, Purplebricks’ latest problems lie closer to home as the online estate agent is bemoaning a slowdown in new instructions to sell or rent properties here in the UK.”
He added: “The Bank of England’s latest decision to do nothing will offer some comfort to would-be house buyers and shares in house builders are all up in response to the Old Lady of Threadneedle Street’s latest bout of studious inactivity.
“Purplebricks will therefore be hoping that the current lull is just a temporary one or, that if high prices do dampen demand, that the government starts to intervene in the housing market once more.”