June 15, 2025 • 9 mins
Host Chris Smith (2SM’s Across Australia) is joined by real estate expert Peter O'Malley to unpack the ACCC’s investigation into REA Group and the growing backlash against skyrocketing advertising fees. With Australian property sellers now footing the world’s highest real estate ad costs, the discussion exposes how the “Vendor Paid Advertising” model evolved, who really benefits, and whether true competition in the portal space is even possible.
As always if there is a specific topic you would like for us to cover, please reach out and let us know!
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Well, cuts to interest rates this year have
seen a spike in real estateactivity in most parts of
Australia.
But before you take anotherplunge into buying or selling,
you may wish to turn yourattention to the latest alleged
case of price gouging in theindustry.
The ACCC is investigating REAGroup the owners of
(00:21):
realestatecomau due to concernsabout competition and pricing,
including allegations of pricegouging.
The ACCC is investigating thegroup's market dominance, its
subscription offerings andadvertising fees.
Now, as you may be aware,realestatecomau has become the
go-to source for propertylistings, overtaking domain by a
(00:44):
hell of a long way.
There is no competition betweenthe two anymore.
But are they abusing theirnewfound power?
And what should we be on thelookout for?
Joining me now is PeterO'Malley from Harris Partners in
Sydney, who's been watchingthis case very carefully.
Peter, welcome to the SuperRadio Network.
Speaker 2 (01:02):
Pleasure, Chris.
Good morning to you and yourlisteners.
Speaker 1 (01:03):
Now, am I right that REA the group have just about
crushed the other competitors,but the once main competitor
Domain, and it's almost amonopoly, isn't it?
Speaker 2 (01:16):
In different markets, domain has fallen to complete
irrelevance.
Thankfully, in our market inthe inner west and the inner
city of Sydney, and the same forMelbourne, the inner cities of
Melbourne domain still has valueto real estate agents.
But as you head further intothe suburbs, realestatecom
enjoys a monopoly situation andthey're weaponizing that through
(01:40):
their pricing.
Speaker 1 (01:41):
So when you say pricing, is it true that
Australia is now far and awaythe most expensive country in
the world to advertise realestate?
Speaker 2 (01:50):
Absolutely.
By far and away.
It's an unjustifiable cost.
So there are reports that realestate agents are now paying up
to $5,000 for one advertisementfor one house that only as
recently as 2009, was costingthem under $1,000.
Speaker 1 (02:07):
And that $5,000 is paid by me when I sell right.
Speaker 2 (02:13):
Well, this is why the industry didn't care until very
recently.
Chris, that's right, theAustralian property industry
runs on a model called VPAVendor Pays Advertising.
So in the early days whenrealestatecom and Domain were
increasing their advertisingfees, agents just laughed it off
and said well, it doesn'treally concern us because the
vendors pay it anyway.
But pricing has got to a pointnow where neither the consumer
(02:37):
nor the real estate agent feelsthat it's justified and the
industry is understandablysquealing to the ACCC about
price gouging.
But the reality here for thereal estate industry, chris, is
they've played themselves downthis hole.
If you've got a pet crocodileand you feed it, one day it'll
come looking for you.
And that's where the realestate industry is now, where
(02:59):
it's being devoured by thebeasts that it created.
Speaker 1 (03:02):
So you can't possibly justify increases of over 10%.
What are the increases that areoccurring and being eventually
paid by the vendor?
Speaker 2 (03:12):
Year on year, we've paid 10% increases to
realestatecom and most years toDomain.
I must point out that duringthe GFC in 2008 and during the
pandemic years, those increaseswere set aside, but without a
doubt, every real estate agentgets an annual price increase
well above the CPI from thesewebsites.
(03:33):
What further drains competitionis every time a digital
disruptor comes into theindustry, chris, it's usually
gobbled up by domain orrealestatecom, so any relief
that could be coming for theindustry soon evaporates when it
ends up in predictable hands.
Speaker 1 (03:51):
See, it's interesting if you're selling a house
nowadays and most peoplelistening who may be in this
boat say this year or next year,they'd say oh, and we want to
get it on realestatecomau, andthe real estate agent says no
problem, and there is rarely adiscussion about how much that
process would cost you.
But people who are sellingtheir homes had better find out
(04:14):
and had better ask the question.
Speaker 2 (04:16):
That's right.
Well, this is what's driven therise in the off-market listings
.
Everyone listening Chris wouldknow that's a very popular term
used in the industry now andreally, when people say what is
an off-market listing, it's alisting where the vendor is
prepared to sell through a realestate agent but doesn't want to
pay the exorbitant upfrontnon-refundable cost to go on
(04:37):
realestatecom.
So the auction clearance ratein Sydney has been hovering
around 50% since last August asinterest rates of battered
market confidence.
So whenever you see a 50%auction clearance rate, the 50%
that have failed have all forkedout on average about $10,000
for that campaign that hasn'tdelivered a result.
(04:58):
So realestatecom and Domain toa lesser degree are benefiting
while the real estate consumerfails.
Speaker 1 (05:06):
So what can the ACCC do?
How can they make any kind ofincrease in advertising fees
online reasonable?
Speaker 2 (05:16):
Look.
They need to make sure thatrealestatecom are not crushing
competition.
So James Packer through MyHome,telstra through JustListed have
all had a crack at theirproperty portal website over the
years.
Chris, it came down to a racein two domain and realestatecom.
For whatever reason, domain hasnot been run effectively in the
(05:38):
last 20 years and realestatecomhas gone from an equal
competitor to an all-dominantcompetitor.
And realestatecom has gone froman equal competitor to an
all-dominant competitor.
And, as I say every time adisruptor or a new product comes
into the market andrealestatecom have been very
clever in how they've managedthemselves.
They've been buying a lot ofdata companies.
They're at an unassailableposition at the moment where
(06:03):
their pricing and theirstructure is just basically
forcing or crushing anycompetition in place.
And that is what the ACCC willlook at most is REA Group's
sheer market dominance, which iscrushing any ability for a
competitor to come through andoffer a competing product.
Speaker 1 (06:19):
We can thank Channel 9 for this, can't we?
Because as soon as Domaincollapsed and they didn't know
how to run it, or they madedecisions that made it not as
popular as realestatecomau, weended up not having an oligopoly
but a monopoly, and then priceswent up.
Speaker 2 (06:34):
Yeah, look, domain left an opportunity on the table
.
There's no doubt about that,but I think it starts with the
real estate industry wasessentially the REA sales force.
So people are speculatingthrough this that REA Group one
day might be hiring real estateagents directly.
Chris, I don't actually seethat happening, because the most
(06:56):
effective sales force that theREA Group have is real estate
agents and you go to real estatecourses and they're centered
around how to get more vendorpaid advertising and how to
justify the cost.
And agents will say things tovendors like my job is to
overmarket your home so youdon't undersell, and it's all a
justification to pay anunjustifiable price to these
(07:20):
websites.
Now, if Domain had managedtheir affairs better whether it
be the Fairfax ownership,channel 9, or now the American
firm that has purchased it REA,couldn't exercise this pricing
power that they are.
But Domain has let the industrydown in many ways by not
holding REA to account.
Speaker 1 (07:42):
One quick one who's the third player in this portal
space that operates at themoment, which, I understand,
lists certain properties free ofcharge?
Speaker 2 (07:53):
That's right, it's called Homely, Chris, and the
real estate industry has quietlyinvested in this.
So the owners of Homely havegone around and taken seed
capital in $50,000 chunks fromessentially half the industry.
All the big players in theindustry are quietly invested in
Homely and they are hopefulthat Homely can be the third
(08:15):
wheel to bring some control backto the real estate industry.
But as I read Rupert Murdochsay years ago, when it comes to
classifieds, you have to be infirst or second place.
There's no place for a thirdrunner.
So Homely had a nice conceptthat the real estate industry
quietly but definitely investedin.
(08:35):
But unfortunately for consumersand real estate agents it's not
happening and we're at abreaking point where real estate
firms are going broke nowbecause they can't continue to
pay these firms to realestatecom, and real estate consumers,
when they're selling their house, want to avoid them completely.
Speaker 1 (08:54):
Yeah, fascinating.
We'll see where the ACCC endsup with their investigation.
I understand they're gatheringevidence as we speak.
Peter O'Malley, thank you verymuch for unpacking that for us.
Speaker 2 (09:05):
My pleasure, Chris.
Great to catch up.
Speaker 1 (09:07):
Good on you.
Fantastic to have you on 2SMPeter O'Malley from Harris
Partners in Sydney.
Well, cuts to interest rates this year have
seen a spike in real estateactivity in most parts of
Australia.
But before you take anotherplunge into buying or selling,
you may wish to turn yourattention to the latest alleged
case of price gouging in theindustry.
The ACCC is investigating REAGroup the owners of
(00:21):
realestatecomau due to concernsabout competition and pricing,
including allegations of pricegouging.
The ACCC is investigating thegroup's market dominance, its
subscription offerings andadvertising fees.
Now, as you may be aware,realestatecomau has become the
go-to source for propertylistings, overtaking domain by a
(00:44):
hell of a long way.
There is no competition betweenthe two anymore.
But are they abusing theirnewfound power?
And what should we be on thelookout for?
Joining me now is PeterO'Malley from Harris Partners in
Sydney, who's been watchingthis case very carefully.
Peter, welcome to the SuperRadio Network.
Speaker 2 (01:02):
Pleasure, Chris.
Good morning to you and yourlisteners.
Speaker 1 (01:03):
Now, am I right that REA the group have just about
crushed the other competitors,but the once main competitor
Domain, and it's almost amonopoly, isn't it?
Speaker 2 (01:16):
In different markets, domain has fallen to complete
irrelevance.
Thankfully, in our market inthe inner west and the inner
city of Sydney, and the same forMelbourne, the inner cities of
Melbourne domain still has valueto real estate agents.
But as you head further intothe suburbs, realestatecom
enjoys a monopoly situation andthey're weaponizing that through
(01:40):
their pricing.
Speaker 1 (01:41):
So when you say pricing, is it true that
Australia is now far and awaythe most expensive country in
the world to advertise realestate?
Speaker 2 (01:50):
Absolutely.
By far and away.
It's an unjustifiable cost.
So there are reports that realestate agents are now paying up
to $5,000 for one advertisementfor one house that only as
recently as 2009, was costingthem under $1,000.
Speaker 1 (02:07):
And that $5,000 is paid by me when I sell right.
Speaker 2 (02:13):
Well, this is why the industry didn't care until very
recently.
Chris, that's right, theAustralian property industry
runs on a model called VPAVendor Pays Advertising.
So in the early days whenrealestatecom and Domain were
increasing their advertisingfees, agents just laughed it off
and said well, it doesn'treally concern us because the
vendors pay it anyway.
But pricing has got to a pointnow where neither the consumer
(02:37):
nor the real estate agent feelsthat it's justified and the
industry is understandablysquealing to the ACCC about
price gouging.
But the reality here for thereal estate industry, chris, is
they've played themselves downthis hole.
If you've got a pet crocodileand you feed it, one day it'll
come looking for you.
And that's where the realestate industry is now, where
(02:59):
it's being devoured by thebeasts that it created.
Speaker 1 (03:02):
So you can't possibly justify increases of over 10%.
What are the increases that areoccurring and being eventually
paid by the vendor?
Speaker 2 (03:12):
Year on year, we've paid 10% increases to
realestatecom and most years toDomain.
I must point out that duringthe GFC in 2008 and during the
pandemic years, those increaseswere set aside, but without a
doubt, every real estate agentgets an annual price increase
well above the CPI from thesewebsites.
(03:33):
What further drains competitionis every time a digital
disruptor comes into theindustry, chris, it's usually
gobbled up by domain orrealestatecom, so any relief
that could be coming for theindustry soon evaporates when it
ends up in predictable hands.
Speaker 1 (03:51):
See, it's interesting if you're selling a house
nowadays and most peoplelistening who may be in this
boat say this year or next year,they'd say oh, and we want to
get it on realestatecomau, andthe real estate agent says no
problem, and there is rarely adiscussion about how much that
process would cost you.
But people who are sellingtheir homes had better find out
(04:14):
and had better ask the question.
Speaker 2 (04:16):
That's right.
Well, this is what's driven therise in the off-market listings
.
Everyone listening Chris wouldknow that's a very popular term
used in the industry now andreally, when people say what is
an off-market listing, it's alisting where the vendor is
prepared to sell through a realestate agent but doesn't want to
pay the exorbitant upfrontnon-refundable cost to go on
(04:37):
realestatecom.
So the auction clearance ratein Sydney has been hovering
around 50% since last August asinterest rates of battered
market confidence.
So whenever you see a 50%auction clearance rate, the 50%
that have failed have all forkedout on average about $10,000
for that campaign that hasn'tdelivered a result.
(04:58):
So realestatecom and Domain toa lesser degree are benefiting
while the real estate consumerfails.
Speaker 1 (05:06):
So what can the ACCC do?
How can they make any kind ofincrease in advertising fees
online reasonable?
Speaker 2 (05:16):
Look.
They need to make sure thatrealestatecom are not crushing
competition.
So James Packer through MyHome,telstra through JustListed have
all had a crack at theirproperty portal website over the
years.
Chris, it came down to a racein two domain and realestatecom.
For whatever reason, domain hasnot been run effectively in the
(05:38):
last 20 years and realestatecomhas gone from an equal
competitor to an all-dominantcompetitor.
And realestatecom has gone froman equal competitor to an
all-dominant competitor.
And, as I say every time adisruptor or a new product comes
into the market andrealestatecom have been very
clever in how they've managedthemselves.
They've been buying a lot ofdata companies.
They're at an unassailableposition at the moment where
(06:03):
their pricing and theirstructure is just basically
forcing or crushing anycompetition in place.
And that is what the ACCC willlook at most is REA Group's
sheer market dominance, which iscrushing any ability for a
competitor to come through andoffer a competing product.
Speaker 1 (06:19):
We can thank Channel 9 for this, can't we?
Because as soon as Domaincollapsed and they didn't know
how to run it, or they madedecisions that made it not as
popular as realestatecomau, weended up not having an oligopoly
but a monopoly, and then priceswent up.
Speaker 2 (06:34):
Yeah, look, domain left an opportunity on the table
.
There's no doubt about that,but I think it starts with the
real estate industry wasessentially the REA sales force.
So people are speculatingthrough this that REA Group one
day might be hiring real estateagents directly.
Chris, I don't actually seethat happening, because the most
(06:56):
effective sales force that theREA Group have is real estate
agents and you go to real estatecourses and they're centered
around how to get more vendorpaid advertising and how to
justify the cost.
And agents will say things tovendors like my job is to
overmarket your home so youdon't undersell, and it's all a
justification to pay anunjustifiable price to these
(07:20):
websites.
Now, if Domain had managedtheir affairs better whether it
be the Fairfax ownership,channel 9, or now the American
firm that has purchased it REA,couldn't exercise this pricing
power that they are.
But Domain has let the industrydown in many ways by not
holding REA to account.
Speaker 1 (07:42):
One quick one who's the third player in this portal
space that operates at themoment, which, I understand,
lists certain properties free ofcharge?
Speaker 2 (07:53):
That's right, it's called Homely, Chris, and the
real estate industry has quietlyinvested in this.
So the owners of Homely havegone around and taken seed
capital in $50,000 chunks fromessentially half the industry.
All the big players in theindustry are quietly invested in
Homely and they are hopefulthat Homely can be the third
(08:15):
wheel to bring some control backto the real estate industry.
But as I read Rupert Murdochsay years ago, when it comes to
classifieds, you have to be infirst or second place.
There's no place for a thirdrunner.
So Homely had a nice conceptthat the real estate industry
quietly but definitely investedin.
(08:35):
But unfortunately for consumersand real estate agents it's not
happening and we're at abreaking point where real estate
firms are going broke nowbecause they can't continue to
pay these firms to realestatecom, and real estate consumers,
when they're selling their house, want to avoid them completely.
Speaker 1 (08:54):
Yeah, fascinating.
We'll see where the ACCC endsup with their investigation.
I understand they're gatheringevidence as we speak.
Peter O'Malley, thank you verymuch for unpacking that for us.
Speaker 2 (09:05):
My pleasure, Chris.
Great to catch up.
Speaker 1 (09:07):
Good on you.
Fantastic to have you on 2SMPeter O'Malley from Harris
Partners in Sydney.
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