Lack of advertising competition pushing up prices for all
The peak body for the real estate sector in New South Wales approached the national consumer watchdog, ACCC, over the rising costs of property-related advertising and erosion of competition in that lucrative space.
The Real Estate Institute of NSW has been busy in recent times seeking to raise the critical issue of costs and competition in our industry, specifically when it comes to online marketing of property.
The Australian Competition and Consumer Commission (ACCC) has launched a probe into the pricing tactics of REA Group, which owns realestate.com.au. REINSW has welcomed the independent scrutiny of the market’s dominant player.
Strong competition is critical in any market. It drives better consumer services and downward pressure on prices.
REINSW, after listening to the concerns of real estate agents, businesses and consumers, approached the ACCC approximately 18 months ago with evidence of dramatically escalating fees being charged by REA.
Our members have informed us that these increases are often around the 10 per cent mark year-on-year, significantly above the Consumer Price Index (CPI). One agent recently reported a 30 per cent increase. Some media outlets have alleged the increases have been above 50 per cent for some agents.
This is clearly unsustainable.
For property investors, the impacts of increasing fees are numerous.
In seeking to rent out an investment property, listing portals can be effective in finding a tenant. Should an investor then wish to sell property, again online advertising is typical of most marketing strategies.
No one is questioning the value of an online listing to agents, vendors and landlords. The concern is the escalating costs.
Whenever the fee incurred to list on a portal increases, the additional cost is borne by the investor. With evidence of REA continually raising fees so dramatically, these sums of money are no longer marketing costs. They are now investment considerations.
Investors must ask themselves if the level of value brought to the transaction by a portal listing is commensurate with the investment they have to make to list online when seeking to lease or sell their property.
For more and more vendors, the answer appears to be ‘no’.
Vendors are increasingly opting against an online strategy, based on the rising costs. We are therefore seeing more vendors choose to sell their property ‘off-market’, which is actually an incorrect term. The property is on the market, it’s just not advertised online.
This response from the market raises other concerns. When agents and vendors cannot afford or are unwilling to advertise across multiple platforms, including those in competition to REA Group, those other platforms no longer enjoy the industry’s support.
This further erodes competition. More competition is what the industry and consumers need, because when one entity holds so much control over the property transaction, as is currently the case, it contributes to an environment of higher costs for everyone.
