Property listings giant REA Group under ACCC investigation over pricing concerns

REA Group, operator of Australia’s largest property portal Realestate.com.au, is being investigated by the Australian Competition and Consumer Commission (ACCC) over allegations of price gouging and market power abuse.

The site, which REA says attracts more than 122 million page views and 12.3 million users per month, is the seventh largest online brand in the country.

The ACCC probe has entailed meetings with real estate agents and is investigating whether REA Group is exploiting its market dominance to unfairly inflate listing and subscription prices beyond fair market levels.

The pricing model of the News Corp-controlled listings giant is now under the ACCC’s microscope after the group received a mandatory request from the ACCC “requiring REA to provide information regarding certain subscription offerings”.

REA lodged a note with the ASX late on Tuesday (27 May).

“REA is co-operating fully with the ACCC and is unable to comment further for confidentiality reasons.

“REA will continue to comply with its disclosure obligations and will update the market on this matter as appropriate,” the note said.

In a vendor-paid marketing environment, sellers and agents in Australia face some of the world’s most expensive advertising costs that agents are now saying have soared beyond affordability.

Agents claim prices have risen more than 5,000 per cent over 15 years, with some premium listings in Sydney reportedly exceeding $5,000. According to industry figures, there has been 50-times increase from the $75 cost back in 2009 for those top-priced listings.

The regulator issued REA Group, a $32 billion listed company, with a Section 155 Notice, requiring the company to provide further information on the matter.

REA Group responded by saying it is cooperating fully with the ACCC and “remains committed to providing value and flexibility to its customers”.

“REA Group’s operations are supported by a significant online presence, with millions of users visiting its platforms monthly.

“The outcome of the investigation could impact the company’s market positioning and stakeholder interests, although REA has stated it will continue to fulfil its disclosure obligations.”

Pricing system based on postcode

Realestate.com.au is considered to have a dominant market share, with some sources estimating it has at least 50 per cent more views and listings than Domain. Realestate.com.au has enjoyed a 12 per cent year-on-year increase in new listings.

Many agents prefer to list on both realestate.com.au and Domain to maximise exposure of their properties for sale.

Real estate comparison service bRight Agent’s founders said REA has been damaging the real estate ecosystem for years.

“It’s about time someone stood up to REA for the interests of consumers,” said Aaron Scott, co-founder of bRight Agent.

“For far too long, they’ve been allowed to charge obscenely excessive listing fees with no room for negotiation.

“Agents are squeezed, and ultimately it is the sellers who end up footing the bill; it’s an absolute farce.”

“What’s the justification for a $5000 listing fee? There isn’t one,” Mr Scott continued.

“This is digital real estate robbery. A monopoly like this makes it nearly impossible for new players to compete or for fair pricing to exist. Sellers aren’t paying for value—they’re paying because there’s no alternative.”

“They’ve turned suburb wealth into a surcharge. It’s postcode price discrimination, plain and simple,” Mr Scott said.

Property buyers footing the bill

Real Estate Institute of NSW (REINSW) CEO, Tim McKibbin, said his organisation first approached the ACCC 18 months ago with evidence of the dramatically escalating fees being charged by REA.

According to Mr McKibbin, based on direct feedback from agents, it is commonplace for REA to increase its fees well above the Consumer Price Index (CPI), significantly affecting consumers’ costs.

“Agents report annual REA price increases well above the CPI, often in the realm of 10 per cent, and in many instances, even more and it needs to be called out,” Mr McKibbin said.

“One agent this week claimed the fees charged by REA, which are borne by his vendors, increased by 30 per cent in a year.

“These escalating costs significantly increase the cost burden for consumers and are clearly unsustainable.

“It is a clear case of the industry needing more competition.

“When one entity holds so much control over the property transaction, the lack of choice leaves consumers vulnerable and diminishes their power.

“While the escalating costs charged by REA are obviously a concern, of greater concern is the response from the market.

“Because agents and vendors cannot afford or are unwilling to advertise across multiple platforms, consequently those platforms no longer enjoy the industry’s support, further eroding competition.

“Whether or not REA’s conduct amounts to an abuse of market control is for the ACCC to determine but there are clearly questions to be asked and answered,” Mr McKibbin said.

In the midst of a housing crisis, the matter has attracted the attention of politicians.

Federal MP (Member for Mackellar), Dr Sophie Scamps, said there was a clear need for the ACCC to investigate the prices being charged for using such an essential service.

“There are already too many barriers to people selling and downsizing their homes, so it’s disturbing to hear Australians are, yet again, apparently paying inflated prices to have their house listed on real estate marketing platforms.”

REA also operates a commercial listings site, realcommercial.com.au, comparison site Mortgage Choice, and property data provider PropTrack.

Its nearest competitor in the market, Nine’s Domain, recently entered into a binding agreement with US real estate giant Costar, which valued the company at $3 billion. Domain has a market capitalisation of less than one-tenth of REA.