The Unconditional Blog

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Australian real estate industry lines up to challenge web leader

Posted on: June 27th, 2011 | Filed in Featured, International, Real Estate Industry, Real Estate Industry News

NZ’ers are always interested to see what is going on in Australia and when it comes to online real estate we here at Realestate.co.nz are always interested to see what is happening on the other side of the ditch. At the moment it seems quite a lot judging by the front page headline from the Australian Financial Review.

Real Estate Agents ready to “revolt” reads the headline. It appears that after more than a decade of benefiting from the online transition of property buyers from print to the web,  with the consequential financial savings; the industry is now revolting from what they see as exorbitant charges from the online market leader realestate.com.au (just for clarity there is no connection between our site realestate.co.nz and the Australian site of the same domain name).

Realestate.com.au (REA Group) has been a stellar success of web marketing, founded before the dotcom crash of 2000 it has grown from nothing to now be valued at in excess of A$1.6bn as an ASX listed company (the majority shareholder is News Corporation). The site holds the lion’s share of web visitors and around 95% of all listings. The chart below tracks the leadership in web traffic by realestate.com.au to its nearest competitor (Fairfax owned domain.com.au).

With this powerful position of dominance of the collective eyeballs of property buyers and the dominance of content, the company has over the past decade grown revenue from a couple of million dollars to well over A$160m. On average each real estate office in Australia pays realestate.com.au over A$1,000 a month and this scale of fee combined with the regularity with which they increase this fee now has the industry up in arms in a very public manner. The industry as reported in the article is looking to band together under what they are calling “Project Rebellion” to power an alternative website with which they hope to secure a competitive threat to submit realestate.com.au into reducing fees or potentially remove it from the market.

Could this happen? – the rich and comprehensive content of real estate listing is what property buyers seek, in theory they will go to the site that has the most content. That content is totally in the control of the agents, so in theory this is possible. However consumers are creatures of habit and have no idea what constitutes comprehensive content. A new website would have to spend a lot of money promoting itself to create awareness to say it was the “new home” of property listings online. At the same time the agents would all in unison have to stop using realestate.com.au, something many in the industry might be wary of doing as it is a very powerful and effective advertising medium for their clients listings with over 7 million monthly unique visitors.

The whole challenging conundrum is very well detailed in an article by Simon Baker in the Property Observer – his summation is that there is very little chance of this initiative having any legs. As a point of note Simon Baker is the former CEO of realestate.com.au and still remains a shareholder. As he states in his article, the publication of this story in the Fin Review last week knocked 5% off the market value of REA amounting to a paper depreciation of the company’s value of some A$80m – that personally impacts Simon.

New Zealand

What implications might this initiative in Australia have for the NZ industry?

In NZ there are really two key online real estate websites. Trade me Property has the highest level of website visitors. In the past month it received over 1.4 million unique browsers as measured by Nielsen online, by comparison realestate.co.nz received just over 400,000 unique browsers (as a point of reference there were just 5,766 properties sold in the month, which just goes to show the casual browsing appeal of property to kiwis). In terms of content realestate.co.nz holds the most comprehensive selection of listings from licensed agents – around 95% of all such listings. Trade me property has more listings in total on their site, however their licensed real estate listings are supplemented by a significant number of private sale listings.

Trade me Property is owned by Fairfax media whereas Realestate.co.nz is owned by two shareholders – the Real Estate Institute holds 50% and the balance is held by 6 of the larger real estate companies (Harcourts, Harveys, Ray White, Bayleys, Barfoot & Thompson and LJ Hooker).

In NZ there is a disparity of what each website charges for its services to its agent. Realestate.co.nz has a two tier subscription based on office size. Large offices (more than 6 active salespeople) are charged $300 per month with small offices $225 per month. The charges for Trade me are higher at $799 per month. Certainly the real estate companies in NZ do not pay as much as their counterparts in Australia, however when seen in perspective of the relevance of online marketing and how much it has made print media so redundant for property marketing, it is somewhat surprising that this reaction is happening at all.

Article Discussion

  1. Robyn Ellson says:

    When I was at AREC earlier this year and heard of realestate.com.au’s exorbitant charges I was stunned. Just goes to show that it doesn’t matter if you’re a print medium or online medium, once you are seen as the go-to site for property listings and you’re leaving your competitors to eat dust you’ve got the power to charge what you like… However, as for print media being redundant – this isn’t the case even in Australia. People still like to flick through a glossy publication of property listings, just as you would for a fashion magazine or a car magazine. I think this is unlikely to change anytime soon.

  2. Robyn

    Thanks for your comment and perspective on this issue – I imagine attending AREC would have been a interesting opportunity to see the Australian marketplace.

    I must confess that my final line stating that print media was redundant was a little tongue in cheek – it seemed to neatly assist the perspective of talking value for money. I would be the first to agree that print media is far from dead, although it ain’t healthy. There is always and probably will always be a place for quality property publications. They can never compete with the web on timeliness or comprehensiveness so they have to carve out a niche around stimulation and craving – built around the browsing and indulgent experience, probably wrapped up into design and style magazines.

  3. And there’s the difference.

    1] a website portal set up to help and showcase properties to help buyers, by the Real Estate INDUSTRY itself

    2] a website portal set up to make money for a corporation. In that I mean initially to replace the losses that online print media owners have been exposed to, as they’re the first to note that their “lower returns” have been as a result of declining readerships of those previous “print” mediums.

    Which one is more likely to impact on the participants, in terms of yearly fee / costs increases?

    Ones about a device to help property browsers, ones about making money for shareholders.

    Who do you think has the industries best at heart?

  4. Richard says:

    Hi Alistair,

    You’re statement that your site has nothing to do with realestate.com.au is not exactly true in that anyone who is in Australia and looking at the realestate.com.au website can also feed directly into the realestate.co.nz site can’t they? That was a deal (and a good one) that you facilitated a couple of years ago from memory.

    From this side of the ditch the so called rebellion against the realestate.com.au site needs to be put into perspective in that its a handful of agents making the noise. The industry in Australia is very fragmented with little agent unity or compulsion to get together on anything let alone a separate website to challenge the incumbent No 1.

    I will not be holding my breath. You guys are in a better place.

  5. Richard

    Thanks for your comments. You are completely right that we have a marketing agreement which does direct traffic to our site from the realestate.com.au site. As you can appreciate what I was assisting in communicating was the fact that whilst our domain names are identical there is no ownership alignment.

    As for your comments from an Australian observer – very much appreciated. Could well be a classic example of media headlines designed to sell newspapers.

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