This week, Australia’s biggest real estate portals, Domain and realestate.com.au announced plans to hike listing prices to more than 10 times the inflation rate.
Such increases will strengthen their monopoly, cripple healthy competition and fuel our housing affordability crisis. Here’s why.
Recently, realestate.com.au and Domain simultaneously announced plans to roll out a new pricing model for property listings. The proposed increases are more than the entire profit margin on a sale for companies like PropertyNow. The impact could devastate the For Sale By Owner industry, which operates on high turnover and tight margins. Until now, the industry has been steadily growing, creating healthy competition and an efficient alternative for buyers and sellers needing to keep transaction costs at a minimum.
What will this mean for the real estate industry?
Fewer choices. No competition.
The draw card for agent assisted private sales is the huge cost savings. In the current market, many sellers are struggling with crippling mortgages and can’t afford to sell any other way. And these numbers will increase as interest rates rise. But the proposed new prices will force the cost of selling privately online ever closer towards agent commission costs.
At PropertyNow, we believe Australians have a right to choose not to pay commission when listing on realestate.com.au and domain, in which case they need alternatives that allow them to sell their own home inexpensively and effectively.
Increases likely to fuel housing affordability crisis.
There are two components to this. Firstly, as avenues close, a lack of competition will drive costs even higher. Secondly, agent commissions are either the second greatest or even the single greatest cost in a property purchase. They are also the only cost that is completely unnecessary. Commissions are ultimately passed onto buyers, as sellers have to factor them into their asking and final selling price. Agent commissions and the impact they have on property prices have never been discussed nor scrutinised in any form of media to date, despite the government making it blatantly clear that housing affordability is one of their major priorities.
Prices favour traditional real estate agencies.
The new pricing model will affect mainstream agencies far less than For Sale By Owner companies. Companies like PropertyNow operate on high turnover and very tight margins. Under the new pricing model, the first 20 listings are free. While this may seem like a good incentive, private sales platforms can achieve 20 listings per day in comparison to mainstream agencies that may take 20 listings per month. And the more listings we achieve, the greater the expense to our (already tight) profit margins. Such price increases would force us to either dramatically increase our costs or lower our very high service levels – neither of which we want or should be forced to do.
PropertyNow has fought for 12 years to level the playing field for private sellers, yet the new prices once again sway to the advantage of the entrenched commissionable sales industry.
Increases grossly out of step with international listing costs.
Unfortunately for Australians, the monopoly of our two major real estate portals is not mirrored anywhere else in the world. Because of this lack of competition, Domain and realestate.com.au have the autonomy to charge whatever prices they want – whether reasonable or not, and even though they are completely out of line with international listing costs.
Prices are likely to keep increasing each year.
Once prices are hiked for the first time, we will see greater increases each and every year moving forward. Before we know it, private selling (even with no commission) will cost $3,000 - over 4 times the current costs. This is likely to mean an end for many private sales platforms, which will sadly limit the avenues and choices for buying and selling property in Australia.
What can be done about it?
Attempts by PropertyNow to negotiate a way forward with the two major real estate portals have been declined. Our competitors, BuyMyPlace and ForSaleByOwner, have also refused our approaches to work together in defending both the industry and our clients. Both stating they are happy to pass on the costs to their clients.
In our view, this isn’t good enough. These price increases are an obscene and unwarranted cash grab by two leading real estate portals because they have the market power to do as they please without any fear of repercussion. With housing affordability currently at crisis point, we need to stand up to these sorts of actions, which shut down healthy competition, driving property prices higher and limiting choices for Australians.
Please share this story and put pressure on Domain and realestate.com.au to act responsibly and fairly in promoting a real estate industry that thrives through healthy competition and greater choices for Australian homebuyers and sellers.