Get all your news in one place.
100’s of premium titles.
One app.
Start reading
The Guardian - AU
The Guardian - AU
National
Sarah Martin

‘The bear at the door’: estate agents say they fear speaking out about realestate.com.au ‘price gouging’

Illustration of monopoly houses falling into a white smartphone
Complaints have been raised about high fees due to the market dominance of the majority-owned News Corp property portal realestate.com.au. Illustration: Victoria Hart/Guardian Design

Real estate agents have hit out at the market dominance of realestate.com.au, which is majority owned by the News Corp-controlled REA Group, saying the portal is “price gouging” as a result of its effective monopoly.

Multiple agency directors, many of whom fear commercial retribution if they publicly criticise the $27bn behemoth, say the company’s tactics and pricing structures have become more aggressive in recent years because of its dominance in the Australian property market.

Complaints have also been raised about price hikes at Domain, which is owned by the Nine Newspaper group and is the second-largest property portal in the Australian market after realestate.com.au.

According to REA Group’s general manager of audience and marketing, Sarah Myers, REA Group’s market position “has never been stronger”, including when compared with its closest rival, Domain.

“We’re a clear market leader in every single market and across every platform – web, mobile, rent, sell,” Myers said in an interview in June this year.

The company reported a $460.5m annual net profit in August, with a market capitalisation of $26.7bn, making it more valuable than supermarket giant Coles. It also reported a 19% increase in growth for revenue from its “buy listings” for the year, driven by average price hikes of 13%.

Both portals have increased prices by about 30% over the past three years, with a top-tiered listing in inner-city Melbourne or Sydney now costing up to $4,000 on each platform.

Since 2009, when the top-tiered package for a realestate.com.au listing cost just $75, prices have increased more than 5,000%.

Price gouging in Australia is not illegal. According to the consumer watchdog, the Australian Consumer and Competition Commission, “prices that people think are too high, known as price gouging, or a sudden increase in price, are not illegal”.

A spokesperson for REA Group said agents could choose advertising packages according to their needs, but said the “seismic shift” from print to online had led to a significant increase in “the size of realestate.com.au’s audience and the number of leads delivered to agencies”.

“REA’s per listing costs are priced to reflect the additional value delivered to vendors and agents in digital prime experiences,” they said.

Domain declined to comment.

The bear at the door

Troy Holmes, the director of Holmes Real Estate in Sydney’s Macarthur region, said the company had put up prices substantially over the past decade and were looking at new ways to “clip the ticket” of agents. He believes the company has its sights on agent’s commissions.

“Their end game is to try to get between us and the vendor – they want to take a percentage of every sale,” he told Guardian Australia.

Holmes lodged a complaint against the portal with the ACCC in 2019 after the website sought to sell agents “leads” when a member of the public used the website to request an appraisal from the agent.

He also complained to the regulator when the portal only listed sales from agents who had paid for more expensive products when people searched for “relevant” sales results in a particular area.

His complaint to the ACCC, seen by the Guardian, said: “My sold properties do not appear under the category of ‘Most Relevant’, even though they are 35% of sales in the area.”

“Using this terminology is deceptive to the consumer,” he claimed. “It is actually more than deceptive, it is deliberately dishonest and not in the best interest of the average consumer.”

After the complaints on both occasions, the portal changed its position. Holmes is unsure if his complaints triggered the backdown.

Holmes also claims that realestate.com.au had effectively discouraged agents from posting agency reviews on a rival site called RateMyAgent. A spokesperson for REA Group disputed this, saying the published reviews had non-exclusive rights, meaning they could be posted elsewhere.

Under realestate.com.au’s pricing structure, agents can choose to buy a subscription package that effectively binds most of their vendors to a “premiere” advertising package, with the option to downgrade only a limited percentage of sales.

The cost for a standard subscription is much lower, with ads as low as $200 per listing, but “opting in” to a premiere advertisement is far more expensive for an individual listing than under the “opt out” model.

“I think to be honest if you are an agent spending on [the] ‘premiere all’ [subscription], you are treated differently to an agent who is on a standard subscription because it is all about the money,” Holmes said.

He accused the portal of “price gouging” and said agents were partly to blame for its dominance.

“As an industry we are also to blame for allowing REA to become the monster they have created by bowing down and buying their products.”

Another industry source said: “It’s like there is a bear at the door and you have to keep feeding the bear.”

Holmes said that many agents were lured to buy the more expensive packages on offer because of the accompanying promotion for the agent – which was also ultimately paid for by vendors.

“It is entirely ego-driven, and the shallowness of agents is that they freak out and think they need to be seen … but at the end of the day the industry is passing the cost on to the consumer.”

‘They are getting deeper into the transaction’

The Real Estate Institute of Australia’s president, Leanne Pilkington, said the price hikes from the portals were placing pressure on agents to squeeze their commissions.

“The thing with real estate agencies is they are small businesses and there is a lot of pressure on margins, and everything is getting more expensive and the price rises are just too significant,” she said.

“The portals are big businesses and as much as they genuinely do try to work with industry and give back to industry, at the end of the day they need to build revenue and they build it via the agents.”

Pilkington said the portals were becoming more involved in real estate transactions, pointing to their acquisition of other companies related to the property industry including Mortgage Choice, CampaignAgent and PropTrack. In March, REA Group abandoned attempts to acquire property forms and contracts business Dynamic Methods after the ACCC warned it could “significantly harm competitors”.

“They are getting deeper into the transaction rather than sticking with just advertising,” Pilkington said.

She said the pricing structure of realestate.com.au products often obliged agents to sign vendors up to higher-priced advertising.

“Sometimes they won’t want their property to be at that level of advertising, they can’t afford to pay for it, but there is an obligation on the agents to have a certain volume of property advertised at that level.”

One agency director, who did not want to be named, said he feared commercial disadvantage if he publicly criticised REA Group.

He also said the organisation was known to bypass the head office that “pays the bills” and appeal to the egos of individual agents who wanted promotion in order to ensure their premium products were purchased. Agents were also offered attendance at functions and overseas trips, he said. “They want to get them on the drug.”

The REA Group spokeswoman said many of its corporate events were educational and supported professional development.

She also said that its customers – real estate agents – “recognise the value, flexibility and choice realestate.com.au provides and continue to preference our products and services to help them do business more efficiently and effectively”.

Many agents ‘have a genuine fear’

Barry Plant’s chief executive, Lisa Pennell, said the advertising price increases were being felt by consumers, and called for regulators to be alert to the market power of REA Group and Domain.

“Competition is important in any industry,” Pennell told Guardian Australia. “There is an inherent risk for any dominant player to lose sight of competitive forces and become insular in their attitude.”

Pennell said that because of the ongoing advertising fee increases, many agents were being forced to eat into their own commissions in order to secure listings.

“Ultimately because the consumer only wants to pay so much, the pressure is on the agents to work for reduced fees, which in many cases may result in poorer outcomes for the customer.”

Barry Plant was one of about 170 real estate agencies and franchisees that was a party to a 2016 application to the ACCC that sought permission from the competition and consumer watchdog to be able to collectively negotiate and, if necessary, boycott, realestate.com.au and Domain.

The application argued that because of the dominance of REA Group, and in some markets, Domain, the online advertising market did not operate like a traditional market.

The consequence of this was that prices were “high and disproportionate” for the services offered; there was a lack of competitive negotiation that was exploited; and a lack of “real choice or flexibility” in the advertising options available to agents and therefore consumers.

The submission stated that “many players in the industry have a genuine fear as to the economic and competitive strength of the media and advertising entities for their power over the individual agencies”.

The group said that it believed that if the ACCC approved their request, the advertising market would be more competitive and prices would come down.

It also warned that without the ACCC authorising the application, “it is expected the market will worsen.”

REA Group pushed back on the application, saying it “inaccurately describes REA as the ‘dominant’ supplier of digital property advertising services and wrongly suggests that there has been a market failure that ought to be remedied by regulatory intervention”.

It argued there was “intense competition” in the market and REA’s contract/pricing model for digital advertising services was “straightforward and offers agents and vendors choice, value, consistency, transparency, fairness, certainty and opportunities for effectively and efficiently differentiating their properties”.

Domain also fought the application, saying “Domain and REA adopt competitive pricing strategies to offer a range of distinct subscription products for agents and listings”.

Ultimately, the ACCC rejected the application from Property Media Group, saying it was not convinced that the “likely benefit to the public would outweigh the detriment to the public”.

A spokesperson for the ACCC said the regulator did not comment on complaints or potential investigations into individual companies.

“Generally speaking, restrictions on access to platforms such as Realestate.com.au will only raise concerns under the Competition and Consumer Act where those restrictions lead to a substantial lessening of competition,” the spokesperson said.

• Do you know more? Email sarah.martin@theguardian.com

Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.