Shifts in the property portal arena
Property24’s recent fee increase has agents talking. Will they be pushed to stand together and seek out an alternative? We take the industry’s temperature
Most house hunters now search online for their next home, and rather than visiting local agents’ sites, they plump for property portals. Property24 is the most visited property portal in the country, although Private Property has made significant ground in recent months, making it South Africa’s fastest-growing portal, with IOL Property is at a distant third. So it’s crucial that an estate agent maintains an online presence that goes beyond listing properties on their own website.
However, as property portals grow in size and extract more and more valuable client data, so their fees increase and their rules become more stringent. Discontent among agents seems to be growing proportionately.
Estate agents have been particularly vocal about the annual price increases announced by Property24. Since 1 April, depending on the package for sales subscriptions, new monthly fees increased from 7.7% (for one to 10 leads) to almost 45.9% (for 751 to 1,000 leads). “We highlight that 94.5% of our clients received an average increase of 12.4%,” says Jacques Rossouw, Property24 GM.
Says Simon Bray, Private Property CEO: “Private Property is increasing its rate card by the Consumer Price Index (CPI) of 7%. This is despite the value growing across our client base. We sent 30% more leads than the previous year but we are only increasing rates by 7% because we are committed to responsible, sustainable growth. We want to be a valued part of the property marketing ecosystem for years to come.”
IOL Property MD Carolyn Savage says: “IOL Property will shortly implement its ﬁrst price increase in more than three years. It has been a free portal for more than seven years and has only introduced a nominal fee to provide users with better exposure and a better portal experience. Our price increase is set at 6% on the subscription amount for Pro account holders only.”
Since 2014, Property24 has increased the number of lead categories from ﬁve in 2014 to nine (from 1 April 2016). This targets those subscribers who fall within the 500 to 1,000 leads per month, which has been split into 501 to 750 leads and 751 to 1,000 leads, resulting in increases of 25% and 45.9% respectively. A subscriber who was paying R1,995 for 800 leads in 2014, will now be paying R3,499 – an increase of 75%.
“We have increased certain of our top lead categories with 45.9% and 25% respectively,” says Rossouw. “We identiﬁed that these categories were substantially out of line with the other lead categories in terms of cost per lead. The 45.9% price increase applies to only 1.6% of our clients. Using the example of an agency receiving 800 leads per month from Property24, the cost per lead is now at R4.37 per lead.”
Rossouw continues: “The 25% price increase applies to 3.9% of our clients. The cost per lead for these clients reduces to R3.06 per lead at 1,500 leads per month. This further reduces as lead numbers increase above 1,500. We believe we continue to provide exceptional value at the price, which is unique to the industry being based on volumes of leads generated.”
But a substantial number of agents don’t share that logic. “Their [Property24] reason for the price increase is the support of Private Property by a group of the country’s largest real estate companies. Property24 staﬀ have been quite open about this in their meetings with agents,” says Bruce Swain, MD of Leapfrog Property Group.
Berry Everitt, CEO of the Chas Everitt International Property Group, says: “We are concerned about these disproportionate increases. This is not based on increased costs for Property24 but basic proﬁt-taking, utilising its dominant market position. The industry set up a joint venture with Property24, called REASA, which Property24 unilaterally cancelled in the middle of last year. In terms of that agreement they were quite amenable to keeping our rate increases at a reasonable level. This [increase] is in stark contrast to the arrangement put in place when they were trying to get the support of the property industry.”
Everitt goes so far as to say that he believes a case can be made that the recent actions of Property24 constitute anti-competitive behaviour. “Until recently, group discounts applied, which have now been cancelled. The reason given was something like, ‘since you are supporting an opposition portal, Private Property, we are no longer willing to honour the discount arrangement’. It sounds almost impossible that one can be penalised for supporting an opposition portal as well.”
While Rossouw says that only a small portion of the market has queried the recent price increases, and that on consultation they have largely concurred that these prices provide good value, industry feedback to Property Professional says otherwise. “Exploited”, “aggravated” and “up in arms but helpless” are some of the descriptors from agents in reaction to the increase.
Bray says their feedback from agents is certainly negative. “I think Property24 may have either misread the mood of agents or is happy to have an antagonistic relationship with the industry they serve. Agents appreciate the service portals such as Property24 and Private Property provide but business is about people who need to feel supported and respected, particularly on the issue of fee increases.”
The increase seems excessive but not surprising, says Christian Kohnle, an estate agent at RE/MAX Helderberg. “If you can offer something that everyone wants – you can dictate the price. Supply and demand is an integral factor in the property business.”
But, says Samuel Seeﬀ, chairman of Seeﬀ Properties, the industry is not enamoured with Property24. Seeﬀ Properties, with the industry, went out on a limb with Property24. “We wanted to be alongside them as they grew and secured an industry deal. Once they had established themselves, they cancelled the deal at the ﬁrst opportunity, despite our wishes not to, and to say, let’s engage.
“We get eyeballs from them, no question. And with their financial muscle, they continue to grow. But with the latest price increase one has to ask, is this just the start? Where does it go to from here? And how to do we protect our own turf?”
WINNERS AND LOSERS
Says Swain: “Right now it looks like a two-horse race between Property24 and Private Property, with ground being made up by Private Property in terms of leads and listings. But Private Property has an advantage in the long run with agent support and loyalty; something Property24 forfeited with their cancellation of the REASA transaction and now with the heavy-handed rate increases.”
“Marketing spend will ﬂ ow from print to online as we have seen in other markets,” says Rossouw. “Our business model stays the same. However products will continue to evolve to enable those who wish to compete more eﬀectively online.”
Bray believes digital marketing has been relatively inexpensive for the value it provides. “Online is providing more than 90% of the buyer enquiries in the market but still receives only a relatively small amount of the marketing spend. The value of print is about ﬁnding new ways to deliver for its clients. We are working closely with Sunday Times Neighbourhood and continually innovating the oﬀering to make it complementary to our clients’ digital eﬀ orts.”
Everitt is less positive about the future of print. “Print is the biggest loser. Technology has improved dramatically and the experience that any consumer would have on the internet surpasses that of print. As to who might be the winner in the portal war … I think actions like Property24 has just taken will drive agents to alternatives such as Private Property.
“Portals are here to stay. Our role as agents would be to ensure that we are not disintermediated in the process … and we are working on that.”
BALANCE OF POWER
The industry may well be up in arms, but let’s not forget that agents are in fact in control. Or could be … Agent listings put Property24 where it is. Property24’s signiﬁcant market share and high margins may infuriate the industry, but mean that it will remain the dominant portal for the indeﬁnite future unless agents can regain control of the homebuyer audience and ﬁnd a reasonably priced alternative.
Individually, agents may feel limited in what they can do. But united they could wield collective power to send a strong message: they won’t accept exorbitant price increases and further erosion of the industry.
Much will depend on the patience of the agency owners and advertisers being prepared to play a long game. In the end, though, property portals provide a service to buyers and sellers, and it will be those consumers who will decide on the best portal for them, whether searching for or listing property.
ONLINE HOUSE HUNTING
According to research conducted in bigger online markets, like the US, it is now estimated that 80%-90% of property searches begin online, compared to just 30% in 2002.
Words: Catherine Davis