Despite the property raffle sector enjoying increased popularity over the last few years, the star prize home is only awarded to a winner 19% of the time, according to the latest research.
House raffle platform, Winmydreamhome.com, analysed data and highlights that in 2018, there were 24 raffles, dropping to just 8 in 2019 before rocketing to 92 in 2020. So far, halfway through 2021, we have seen 62 raffles and counting.
This increase suggests that raffles are proving to be an ever more popular and therefore successful alternative to buying a home on the open market. But, if we take a closer look at the data, a different narrative begins to emerge.
The first thing to consider is that many of these raffles are yet to actually finish. 19 of 2020s 92 raffles are still open, as are 48 of the 62 held so far in 2021. We cannot, therefore, yet call these raffles a success.
In fact, since 2018, the UK has seen 186 house raffles and 36% of them are still open, with entrants still waiting to find out if they’ve won.
Going deeper still, we see that just 19% of raffles since 2018 have resulted in a home being awarded as a prize. 37% of raffles have failed to sell enough tickets to justify awarding the promised house and have instead awarded a lesser cash prize to the winner.
More worryingly, 5% of house raffles have sold so few tickets that entrants have had to be refunded for their ticket price, and 2% of them have ended without refunds, a prize awarded or an explanation.
Why, if house raffles are so ineffective, do companies keep hosting them? The answer, in its simplest form, is that it’s a no-fail situation.
In those instances where enough raffle tickets are sold to justify awarding the house, the ticket sales, on average, generate 17% more cash than the value of the prize property.
In a successful raffle, the average value of the prize house is £426,000. The average income from tickets is £500,000, creating an average profit of £74,000; a +17% difference between cost and revenue for the host.
In some cases, however, successful raffles have resulted in profits of over 400%, including a 2020 raffle for a £200,000 house in Ireland that generated an estimated £1 million in ticket revenue, a profit of £880,000.
But even if a raffle is unsuccessful, meaning insufficient tickets are sold to justify awarding the house, the host of the raffle still comes out on top. This is because, in most unsuccessful raffles, a consolidatory cash prize is awarded instead of the house.
However, the exact amount of money that will be awarded is rarely, if ever, stated when entrants buy their tickets. This gives the host plenty of wiggle room to recoup their own costs before giving whatever amount is left over as the prize. These costs can reach into the hundreds of thousands of pounds, ranging from TV advertising and online marketing campaigns to the extravagant additional incentives used to tantalise the ticket-buying public. Such incentives have, in the past, included a Ferrari 360, a BMW X3 M-Sport, and an additional £50,000 cash to help the winner kit out the prize home.
Marc Gershon, of Winmydreamhome.com, commented: “It’s shocking how few raffles result in the lucky winner being awarded the promised house. And while a cash prize reaching into the hundreds of thousands sounds like a decent consolidarity prize, one can’t help but think that house raffles have become a quick-profit grab for the hosts rather than an alternative route to market for buyers. In any other disguise, this would be labelled a sham.
“Many platforms offer zero transparency as to what their costs are and how much the cash prize might be before entrants buy their tickets. An unsuccessful raffle could still generate £200,000 in ticket revenue, but the eventual cash prize could be as little as £10K. And because we’re given no insight into these workings, we have no idea if the prize amount is a decent and justifiable one.
“For example, many raffles say that a percentage of ticket revenue will be given to charity, but they do not state what that percentage will be. Nor are they transparent on how many tickets have been sold. This gives them complete freedom to do with the money what they like without anyone knowing whether questions should be asked.
“At winmydreamhome.com, we’re currently hosting our second raffle and we’ve designed our proposition on a philosophy of absolute transparency, from how many tickets have been sold, to exactly how much goes to charity, and even what each entrant’s odds of winning are before they buy their tickets and the minimum cash prize pot at this point of entry.
“But even with all of this in place, we’re still not sure we’ll host another raffle anytime soon - the current wider practices of our peers isn’t something we feel we should be associated with and is something that the ticket-buying public must be made aware of.”