How long can Property24 increase rates in this way?

How long can Property24 increase rates in this way?

MAIN IMAGE: Richard Gray, CEO Harcourts SA; Ebo Quagraine, principal and co-founder Propertyzz.Com; Bryan Biehler, managing director Huizemark; Xoliswa Tini, principal and founder Xoliswa Tini Properties.

South Africa’s biggest property portal has had subscription price increases in some instances of between 50% and more than 300% over the last four years – is Property24 adding value or milking the cow?

Property24 has just announced their annual subscription price increase for 2020 which will become effective from 1 April. This is not unusual as the property portal annually increases their subscription rates. What does draw attention is the high percentage increases, especially in light of the current economic downturn which has negatively impacted house price growth and property sales in general – with the exception of the affordable housing section.

The latest subscription increases vary, depending upon the number of leads and price median, from 7% for the lowest category (1-10 leads R1,3m and less) to 26% for the top category (more than 1500 leads R7m and up). The average increase is 18% year on year.

Price increases are higher than inflation

Property24 justifies their annual increases by pointing out their business costs increase each year with their biggest spend on technical staff and marketing. “Since both of these costs are increasing at above the inflation rate, we need to increase the costs of our service to compensate,” says JP Farinha, CEO Property24.

This aligns with his explanation two years ago on the same matter. He then also added: “Our subscription fee increases will therefore likely always be more than inflation.”

Further reading: Property24 defends price increases

Question is: What business will survive under normal conditions when their output cost ALWAYS exceeds inflation?

Price increases above the inflation rate is one thing, but are increases of between 50% and more than 300% over the last five years justified? The cost per lead in the 1-10 leads R1,3m to R2,5m category was R295 in 2014 – from 1 April the cost per lead in this category will be R444, that boils down to an increase of 50,5% over five years.

The increase in subscription rates for the luxury market has been even more substantial. In 2014 the cost per lead in the 1 500 leads above R7m category was R2 995 – from 1 April it will be R14,196, that is an increase of 374%. This is the property sector that has not been performing well and last year actually entered nominal house price decline for the first time since the 2008 recession and is predicted to continue on this path during 2020.

Must consider SA’s realities

Property leaders say they are distressed and concerned about the continued high subscription price increases by Property24, especially considering the current downturn in the property market. The industry accepts that price increases must happen but says the portals’ increases are too high.

Richard Gray, CEO Harcourts SA, says the property market is not great and these increases are additional costs to carry. “In every market it is about supply and demand and people might reach a tipping point where they don’t feel they are getting value for money and start cutting back on how much they are willing to spend,” he says and adds that they also feel there isn’t any major extra value added to the service.

Ebo Quagraine, real estate entrepreneur and principal Propertyzz.Com, says he is considering to stop listing entirely on the platform. “The exorbitant costs of the platform is unwarranted and is point blank equal to extortion in my view,” he says.

He also points out that some of the new products offered by Property24, such as rental marketing management offered to landlords, appear to be in direct competition with estate agents, “the people upon whose back it has been built”.

Bryan Biehler, managing director of Huizemark, says he also thinks the “excessive price increases” will result in more agencies looking to alternative portals and more cost-effective options. “There is much talk in the market place around alternatives … more emphasis will be on brand/company/area portals and websites,” he says.

“Price increases are expected however the industry would prefer to see Property24 more aligned with agents in economically more difficult trading conditions, by being ‘more reasonable’ in their application of these pricing increases,” he continues.

Biehler says as long as Property24 continues to provide relatively ‘good leads’, they may get away with “exorbitant increases, but eventually the free market will determine where properties are listed”. “Many of the smaller agencies are up in arms over the rocketing price increase,” he adds.

Others such as Xoliswa Tini, founder and principal Xoliswa Tini Properties, are concerned the portal’s high price increases may make it difficult for new agencies, particularly if they are without strong financial support, to list with them.

“These kinds of increases are creating a discriminatory environment to the haves and the have nots. This is the era whereby we talk transformation in the real estate agency sector but moves like these are denying that opportunity for new property practitioners who do not have the privilege of ‘old money’ to play in the industry space. We all know for anyone to succeed in this industry you need advertising money and an accommodating platform to expose your properties.”

Tini asks how new and young estate agents, especially from previously disadvantaged groups, are going to be able to advertise on this platform. “I urge them not to close doors to the young and new practitioners who want to have a role in the industry,” she says.

Property24 explains the math

Farinha, in response to Property Professional‘s queries about their price increases, says the price increases need to be evaluated in the full context. For example, the category R1.3m-R2.5m > 1,500 leads subscription cost has gone up by 26.6% per annum since 2014. Farinha says this may seem excessive on the face of it but says the cost per lead in this category is still quite low. “At around R8.20 per lead this bracket is more than 5 times cheaper than the bottom brackets,” he says.

That also explains why price increases for the bottom brackets are much lower than for the higher brackets.

Secondly, although the top bracket > R7m and > 1,500 leads has indeed gone up by about 29.6% per annum, Farinha says this doesn’t affect the market much as the most expensive areas do not generate high volumes of leads. At present they don’t have any customers in this category. Across all the > 1,500 lead brackets they have only seven customers.

He says their largest number of customers are in the <R1.3m and 51-150 leads bracket which is now priced at R2 822 per month and has increased by 14% per annum since 2014. However, he says on a cost-per-lead basis they are still three times cheaper than their nearest competitor in this bracket.

Farinha disagrees that their annual price increases prohibit new agents, also those from less privileged backgrounds, from advertising. “Not at all. Conversely our pricing allows for new entrants to enter the market at a very low cost of R428 per month whilst our closest competitor’s rates start at R2,095 per month and that is before the coming 2020 increase. Our model allows new smaller entrants to grow into the more expensive segments as their business expands because we align our costs with value created,” he says.

“We are therefore confident that our prices reflect excellent value to agents and that the increases are fair when viewed on a cost-per-lead basis. It is also important to take into account the fact that inflation of technology related salaries and marketing costs is much higher than CPI,” he ends.

It seems Mr Farinha’s approach is not so much based on his increased costs, but rather on how much the estate agents can swallow.

Where lies the tipping point?

Gray says estate agents may reach a tipping point where they feel that they don’t get value for their money, but it remains to be seen when (or if?) this will happen with the country’s biggest property portal. However, South Africa has a free market system and there are already many alternative online alternatives and more affordable property platforms available to estate agents – and every year more competitors are entering the field. Biehler says many of the ‘free portals’ are rapidly gaining traction with estate agents. “Ultimately the agents will assist in steering eyeballs to these portals,” he ends.

Showing 20 comments
  • Lizette
    Reply

    Totally agree. Hopefully a new portal will kick them out of the market in the not too distant future. They seem arrogant about their decision, their service poor. Time for decisions and if our agents, together, decide to stop advertising on their portal, they will have to go back to the table and sharpen their arrogant pencil.

  • Sheilagh
    Reply

    Answer to the question : Simply milking the cow …. sickening

    • Sue Williams
      Reply

      We need to all be aware of the new free portal’s and service providers and support them so competition is played

  • Jim Alexander
    Reply

    With reference to my previous articles on the P24 ‘leads’ charges, I did as I said and pulled all of my listings from their portal.

    When will the rest of you follow suit instead of moaning?

    Both JP and Charles Scott are experts at spin. Note this comment above…

    “……we align our costs with value created,”

    What value is created when people ‘apparently’ click to open an email address or see a cell number, but never, never make any contact?

    I asked P24 this question some time back. Charles’ response was to inform me that I should remove my listings. I already had.

    When will the rest of you follow me?

  • Christelle
    Reply

    I believe Private Property ads better value, sadly Property 24 is still the portal of choice for most South Africans I believe

  • Adriaan (Entegral)
    Reply

    Wait…..these two guys from REBOSA’s board of directors says agents should support alternative portals? Brilliant. Are they backtracking on the idea of only supporting one portal where they have shares in?
    Well..if that is the case guys, there are plenty of alternatives! Put your money (listings) where your mouth is and let’s get this free market system going, and the free portals the kick start they need!

  • Vic
    Reply

    Dont advertise there and then complain. Support honest companies!

  • Bennie
    Reply

    Estate Principals are fed up with this way of invoicing !! Every time somebody click on your info as an agent it register as a lead!! Costing us money with no value.The lead that is register and paid for isnt a real lead but we must pay for that false hit!!Now they want us to compete for top space and pay more money to benefit themselfs.I urge principals to stand together and confront property 24 new increases.If they dont ahere to our demands we must start our own propertyportrail and be shareholders of our own marketing division!!We can do it !!

  • Bennie
    Reply

    Estate agents must establish their own marketing portal!! Cheaper and value for their money!!

  • Loren
    Reply

    Milking the cow… yes.

  • Evelina
    Reply

    If we all boycott them the public will simply be steered to Private Property.
    It would be so wonderful to stand together and eliminate company/services as such in question..

  • duncan
    Reply

    It’s called a monopoly guys. Take it or leave it. Naspers couldn’t give a hoot. Pay up suckers !

  • NATASHA SWANEPOEL
    Reply

    It is really ridiculous to increase prices so drastically. Us smaller agencies are really struggling to keep head above water. Bring back the system you had before, with every registered deal you take a certain percentage. That worked out much better for us.

  • Leza Ford
    Reply

    Their pricing is ridiculous. Not very helpful in sorting out coastal areas that are non-existent or incorrect in the area we work in. Get a lot of bogus enquirers which pushes up the hits and ultimately the pricing.

  • Dawid
    Reply

    Yes I agree, Property24 is very expensive to list on, and also have a majority (90%) of bogus leads. When you contact them, they don’t answer calls or return emails. So it is all to increase hits and listing prices.

  • Paul
    Reply

    I’ve grown disillusioned with Property24 for quite some time. Been researching other portals and found SA property pages to be promising…

  • Dieter Konieczny
    Reply

    Message to aLL estate agents.

    There is a very simple and legal solution:

    BOYCOTT PROPERTY24!!

    Let’s face it, we have other options to advertise!
    Also, most of my buyers don’t even look at PROPERTY24, or any other similar site, but come only by following my pointer boards!

    Why can’t this industry stand together as one.
    WE HAVE THE POWER, LET’S USE IT:

    BOYCOTT PROPERTY24!!

  • Marie
    Reply

    Have you maybe taken the time to sit down and negotiate your pricing, terms etc

    We did we are getting a better service at a better price with additinal add-ons?

    We also get way more leads, to be fair negotiate first and then relook at things before commenting

    Speak to Robyn she sorted us out in less than 2 days and we are extremely happy

  • Trish Parsons
    Reply

    These exorbitant costs don’t make any sense in a time when we need to be supporting all business in South Africa. We should be standing together.

  • Ray
    Reply

    People need to try this new free portal called Property Central to advertise their listing. It is gaining more traction

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