What Will Be The Effect of Realestate.com.au 2014 Market Based Pricing?

We recently discussed the new Market Based Pricing that new or renewing contracts with realestate.com.au changes to from July 1st, 2014 but how will real estate agents around the country react to the changes?

Traditional industry news sites have now picked up on the story and the general feedback both here and on those sites has been fairly condemning and for many businesses that might spell trouble, but realestate.com.au has been there before.  As far as they are concerned agents will whinge, whine, complain, stamp their feet, express their anger at their account rep and then forget about it and move on.

In comments sections on many articles you will see people express their discuss  that we should support other portals, real estate institute websites and others as though they are the first one to come up with this solution and think it just takes the wave of hand.   This same commentary has been going on since realestate.com.au started its year on year massive price increases. These days it is going to take a paradigm shift in the industry to dent their position let alone kick them out of the number one position.

The question then that has to be asked is will this pricing be the straw that breaks the camels back?

The executives at realestate.com.au have over the years proven themselves adept at poking us hard enough to hurt, but never hard enough for the industry to stop us loving them entirely.

Over the years I have had literally dozens and dozens of calls from people with grandiose plans of opening up a real estate portal to “beat” realestate.com.au at their own game, and of course to make themselves filthy rich !!!

My standard response is whatever you plan to spend on it in the first year, just send to me and walk away from the idea as that will be a damn site cheaper option for you.   Just look at how Packer and Microsoft went going up against realestate.com.au. Despite having realestate.com.au worried at the time they folded like a pack of cards and I really don’t think anybody has worried them since.

Every year we have a new crop of competition who follow through enough to release a finished product.  This year we seem to have a bunch of have a few new challengers like Homley.com.au who in my opinion has a fantastic modern design that I prefer.  With history set to repeat itself  most will fail and close their doors and some will battle on with the scraps that the tier one and the lesser extent tier two portals leave behind.

Don’t get me wrong, I think they watch and analyse their competition very closely, I just don’t think they make too many pricing decisions based on their competition.

Realestate.com.au are proudly trumpeting that the prices are now market based as though this is somehow going to make agents feel better.  They even provide the requisite scenario where an agent will save money on this new plan. I believe like most prices changes before it 10 to 15% of agents will see some sort of modest reduction in their monthly spend.  About 30 to 40% will receive a small to medium increase only but about 45 to 60% will attract significant rises in their total spend with the portal, if they continue to sell the same level of addon products.

Because this new model relies so heavily on addon upgrades I did a quick look at the usage of add on products around mainland Australia.  I tried to find representative suburbs below $500,000 and above $1m  and looked at the use of these add on products.   Realestate.com.au also claim that the demand or enquiry level of a suburb effects its pricing as well so I also grabbed the enquiry level that realestate.com.au is reporting for that suburb and the state as a whole.

Realestate.com.au Addon Products

Click Image to Enlarge

(If anybody is interested in the excel spreadsheet then feel free to contact me)

I am not sure I understand the logic of paying $7000 for a Premier Property upgrade when there is only 11 properties in the suburb. Any buyer is going to look at all 11 properties and nothing is going to get lost on page 8 or 9 like some suburbs.

 This is obviously not a comprehensive study but it does provide us with some interesting observations.

  • Clearly the mores expensive suburbs see higher usage  rates of addon upgrades.  It roughly translates to about double the number of properties upgrading but more importantly the higher value suburbs really don’t bother too much with feature properties at all with Highlight and Premier properties being favoured.
  • Suburb activity does seem to effect the pricing with those suburbs significantly below their states average seeing a reduction in the pricing of their upgrades.  It will be interesting to see if these prices fluctuate yearly based on their changed market conditions.
  • There appears to be limits in place for each upgrade option. Premier Property seems to have a ceiling of $7,000 per month and Highlight appears to have a ceilings of $1,560 with Feature Properties limited to $570.  Remember that volume discounts of between 20  to 45% can be applied depending on what an agency signs up for.

The cost of a feature property has only moved marginally but the highest increases have been with Highlight and Premier Property options. Give the above it is clear that the biggest impact  of this new Market Based Pricing will be for agents who operate in areas with median prices over $500,000. These prices appear to me to be in line with previous increases  of and those operating in areas with a median price over $1,000,000 are going to see significant prices increases and cop the brunt of this.

Now for premium properties marketing costs like these are generally always Vendor Paid Advertising (VPA) so these price rises are going to hit the pocket of the wealthy home owners.     That does not mean that agents will not feel this price rise. I wish every client pays their bills but they dont and agents will be left holding some bad debts.

Despite the new Deficit tax targeting the same demographic I think for the most party they can still afford it and even if they cant the standard or feature listings will still be available.  The products that rise the most are all elective and the biggest danger for an agency is committing to specific volumes and the new prices turn out to be much harder to sell than the previous.  Some agents are going to be left holding the bag of paying for their committed upgrades.

So will this new Market Based Pricing be disruptive to the company?  I highly doubt it.

Obviously these higher prices are going to result in lower takeup  but they are figuring that enough will still use the addon upgrades to deliver a hefty boost to their revenues.   Their biggest risk is that the fallback in takeup negates the higher prices and delivers a revenue drop. Only time will tell but I would not bet against them in this.

As to outside forces, like always there are some risks on the horizon for realestate.com.au and some that are showing some hope but for now, none appear even capable of delivering a stiff jab let alone a knock out blow.

There are plenty that want to hop in the ring with this monster but up till now their record probably sits 200-0 with 195 knockouts.

Ding ding… next please!

Portals, price rises, REA, Realestate.com.au

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About Glenn Batten

Glenn Batten is the General Manager at First National Real Estate Nerang and Principal at the First National Real Estate Upper Coomera office and has over 20 years real estate experience and a passion for technology. Glenn has been writing from an agents perspective on industry issues and covering a range of topics on Business2 since 2007.

19 Responses to What Will Be The Effect of Realestate.com.au 2014 Market Based Pricing?

  1. Glenn Rogers May 20, 2014 at 2:08 pm #

    REA is only a viable business while agents support it, without their content it disappears overnight….. literally.

    • Robo August 10, 2014 at 3:07 pm #

      But rea group are but nervous…
      Plus Using Arnie the terminator in its ads, says something.

  2. Charles C May 20, 2014 at 3:18 pm #

    Hello,

    I am just curious. Do you have an option of not using REA? Are you not better off using Domain.com.au? At the same time, what is the chance of real estate agents working together like those in New Zealand in having their own website?

    I will appreciate your comments on my feedback.

    Thanks.

    • Glenn Batten May 20, 2014 at 3:35 pm #

      REA are number one but in a couple of states second place is relatively close but in others there is daylight between them.

  3. Glenn Batten May 20, 2014 at 3:44 pm #

    ***Warning***

    Please note comments pretending to be agents on this blog will result in your posts being removed. Dont pretend to be a real estate agent telling us how good an alternative your site is. That is spam.

    You can remain anonymous. Just don’t blatantly promote your site in the comments try and especially dont do it pretending to be a real estate agent.

  4. George May 20, 2014 at 4:01 pm #

    Based in the Randwick/Coogee area we recently sold a property using http://www.domain.com.au only and will likely provide the option of domain.com.au only in the future to thos owners who are interested.

  5. Jason D May 22, 2014 at 1:16 am #

    Definitely use domain.com.au

    They were giving away free malware today.

  6. John Stevens May 22, 2014 at 7:08 am #

    Firstly, I’m glad that OpenAgent hasnt made any changes recently so we can get back to the regular REA posts.

    A challenge to you Glenn –
    what is stopping you from just churning from REA completely? There is a First National site (fnuppercoomera.com.au) in your area. You have to start somewhere right?

    And a question to you Glenn or someone else at First National Upper Commera –
    Looking on your site there is a $1m+ really nice property:
    http://www.fnuppercoomera.com.au/1560673/
    And we see it on REA as a ‘highlight’ listing (I think it is)
    http://www.realestate.com.au/property-house-qld-nerang-116979695

    What for this type of listing (~$1m) would a vendor pay for advertising? Looking at the previous post, I’d guess REA costs would be ~$1000 (now?).

    Do you charge different rates based around the market cost of a house? If advertising tomorrow was completely free, would you pass on the saving to the vendor or would you pocket the difference?

    • Glenn Batten May 22, 2014 at 11:07 am #

      ***”Firstly, I’m glad that OpenAgent hasnt made any changes recently so we can get back to the regular REA posts.”***

      I have done over 100 articles on here why would you take a little swipe about that one. Are you connected with them?

      ***”A challenge to you Glenn”***

      Sorry I do not see a challenge in your reply but I will try to answer your questions.

      ***”what is stopping you from just churning from REA completely? “***

      Nothing is stopping me from cancelling the account. We just dont want to. Whilst many other people have said they would turn off their realestate.com.au account, I have never been one of them.

      Realestate.com.au dominates Queensland and there really is no competition and I dont think these recent changes will impact on that….. as the article concludes.

      But.. as it applies to others in different parts of the country that is another question entirely.

      If the changing in pricing would have impacted the base subscription and feature listings it would have been targetted more on agents in the lower price brackets where vpa is not a given then there might have been trouble. But the changes are more targetted to discretionary Highlight and Premier upgrades of those operating in higher price ranges where vpa is more understood and accepted.

      For that reason I dont think there will be too much of an impact on clients leaving.

      ***”What for this type of listing (~$1m) would a vendor pay for advertising?”***

      There is no fixed marketing fee. We would customise it to suit the property, the timeframe of the seller, the budget of the seller and the marketing method used.

      Whilst it would not be something we would recommend it is possible to do the marketing for free by limiting some of the options to our free offerings such as a standard listing on realestate.com.au, agent photos, other portals, standard corflute sign etc etc..

      A recommended package could included highlight or feature listings on realestate.com.au, feature listings on other portals, standalone website, photo signboards, printed brochures, newspaper advertising, auctioneer fees, video production, professional photos, aerial photography etc etc etc.

      ***”Looking at the previous post, I’d guess REA costs would be ~$1000 (now?).”***

      Nearly.. That listing is with our Nerang office, not the Upper Coomera office but I think the highlight was $780 and is now $990 on the new pricing so it has increased some 27% this year on the base rate. Realestate.com.au feature listings have been compounding at those of percentages for quite some time.

      ***”Do you charge different rates based around the market cost of a house?”***

      It is one factor among many of how we would plan a marketing campaign and advertising costs. To be honest the sellers budget can play a bigger part. Some people are finding it a little tough out there

      ***”If advertising tomorrow was completely free, would you pass on the saving to the vendor or would you pocket the difference?”***

      Of course… its the law. We cant oncharge for something we dont have to pay for.

      • John Stevens May 31, 2014 at 6:36 pm #

        I am an REA shareholder and I understand that to keep the YoY growth that looking to an advertising model based around the price of a house or similar is the best way forward.

  7. Glenn Batten May 22, 2014 at 5:12 pm #

    ***2nd Warning***

    If you are smart enough to build a free portal you should be smart enough to know that there are ways to detect that you are posting pretending to be somebody else but when you are a man and you use your own email address at that very portal and then post using a womens name and “pretend” to have just come across their latest blog post on that same portal that you wanted to share you are making it a little too easy.

    I issued a warning earlier on this thread for your last attempt. If you try it again I will out you as trying to mislead other readers.

    As pointed out earlier.. this is not accepted on this blog. You can hide behind the cloak of anonymity, you just cant pretend to be someone else. You are not the first to have tried it.

  8. Glenn Rogers May 22, 2014 at 7:54 pm #

    REA are missing the boat and eating away their own revenue base.

    They have the use their massive capital reserves to seek new streams of revenue.

    There is only so much you can gouge agents for before they start leaving and once that momentum starts they wont be able to stop it.

  9. Jason D May 22, 2014 at 11:40 pm #

    John Stevens must be a rookie.

    One cannot simply come onto business2 and question the premise of the articles.

    • Glenn Batten May 23, 2014 at 3:14 pm #

      are you referring to the warning ?? If so, that is not directed at him because if it was would have been done as a reply.

      There are posts that have not made it through moderation because someone is trying to promote their website as the alternative and they are doing it in a very misleading way.

      and for the record.. IIMHO I dont think he challenged the premise of the article. That was what will be the effect of the recent price changes.

      Its not really clear exactly where he was thinking but I assumed it was that the concept of higher advertising prices for higher priced properties was fair.

      So it probably surprises you but I cant say I totally disagree with that thinking.

      What I have always had a problem with is the sheer level of year on year increases that have compounded to a massive growth in costs to agents and owners. Glenn Rogers touched on it and that is REA have left money on the table all around the world where they have closed down or downsized other portal projects that have failed. The funding of those ventures has come from their cash cow realestate.com.au and therefore out of the pockets of real estate agents and property owners in Australia.

    • Glenn Batten May 23, 2014 at 3:15 pm #

      And his comments are as welcome on here as are yours 🙂

  10. Martin Crampton June 5, 2014 at 9:19 am #

    Thankyou for another well-researched and considered approach, Glenn. I find your dedication to sharing your experienced thoughts on the machinations of the Australian real estate Industry very enlightening, even-handed and laudable.

  11. Martin Crampton July 29, 2014 at 2:37 pm #

    Glenn, do you know it it is true that realestate.com.au already has sales commission sharing in China? If so, what are your thoughts on real estate agents as the frog being slowly boiled? Will they just keep denying it can happen in Australia until it’s too late?
    The Zillow/Truilia pact in the US is a bit like Realestate.com.au & Domain combining in Oz, albeit our subscription model being different and our market with the portals as a more established and vital part of agency life. If agents are happy to have the prospects attracted to their listings on the big portals sold to other agents (via “ebrochure” product), why wouldn’t they share commissions if the portal gained the buyer for their listing?
    http://pando.com/2014/07/28/can-the-zillow-trulia-merger-finally-disrupt-the-home-buying-process-brokers-should-be-terrified-to-find-out

  12. Melissa September 22, 2014 at 1:44 pm #

    What an interesting week in real Estate this week, as we got to meet our new DOMAIN Real Estate Accounts Rep for the Wide Bay Region – Jay Arthur. Poor Jay had his work cut out for him. Although DOMAIN has been leading the way in southern states of Australia, it’s rival realestate.com was & is in truth to be told, owning the Queensland market currently.

    Don’t be fooled into thinking that this would come from realestate.com being so good at their jobs, as they are not!

    The realestate.com local rep is appalling, customer service in general disgraceful & hugely over priced, with offices paying over $1000 – $5000 a month or more in some cases, just for the privilege of advertising with them. Remember this is only a part of an agencies advertising budget a month for their clients.

    So why do we all use them….Well as Jay was to find out, basically, DOMAIN had been letting down all the real estate agencies in Queensland. They let this bully of an advertising company take over with no genuine competition. Suddenly, (due to who DOMAIN decided to give their QLD contract to to service), there was no competition, & like a pig that can not stop feeding, realestate.com.au, consumed the market.

    Markets need competition to keep them honest & DOMAIN soon realised that their past decisions had allowed their biggest competitor to win the market by a landslide!

    When DOMAIN did not step up to the plate creating the online presence required to compete, vendors & buyers became educated to think only realestate.com. for their search engine. The agents then have had no choice but to fulfil the advertising requests of their clients, to;

    Fit the expensive realestate.com bill themselves or
    Pass it on to the consumer.
    After droughts that have reached the coast, a GFC & two floods, selling property has been increasingly hard on some agencies. Think what you will of real estate agents, but in their defence, most agents/agencies don’t get paid weekly only by the commission from sales they earn, especially those who don’t have a rent roll to fall back on.

    You would think that this is when a business like realestate.com who charge excessively these agents/agencies & therefore in many cases the vendors who have to endure the fees, would step up to the plate & support the community of real estate agents who they make their millions off year after year. They could of easily afforded for a period of time to reduce their fees or help create demand through their advertising power in those affected areas, helping them get back on their feet…Apparently I live in dream land.

    Realestate.com should now tread carefully, as we as a group of agents in Queensland have had enough.

    I say bring it on, let the war begin, It will be interesting to see what DOMAIN will do to take back or at least equal the market share with realestate.com. I’m told that within six – twelve months we will all see some significant changes

  13. Dave July 25, 2015 at 11:23 pm #

    CMO for a brokerage in the U.S. here, I had a quick question regarding domain and realestate.com.au.

    What is the raw cost of getting an offices listings on these 2 portals? Is it ‘x’ amount per listing per month? In tiers of 1, 10, 100, 1000? Is it per office? # of agents?

    I am not asking about premium or premier, but just the minimum of getting the listings on the site before scalable negotiations start for upgrades. Was wondering if there was a breakdown per each portal.

    Believe it or not this information can’t be found anywhere, similarly to how it can’t be found anywhere for zillow/trulia/realtor.com/homes.com/homefinder.com in the states. Thanks

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