Could a Property24 giant sink South Africa’s real estate industry?
Online and single-office real estate agencies have been served with notices by South Africa’s biggest property portal, Property24. The notices centre on changing the charging structure instituted by Property24 on physical real estate offices.
A mail circulated to affected agencies, such as PropertyFox and HomeBid, said the portal’s pricing model requires a subscription for every “front door” or area agent – a model that works well with traditional agencies that have a front door for every office in a town or area. Property24 charges a separate subscription for each of these offices. “Where an agency has an office in one town/area and a resident or area agent/s in another, we also ask for a subscription for that area,” the email reads. “Simply put, a separate subscription per front door or area agent. Subscriptions are based on our leads model.”
According to inside sources, the average agency with a single office pays R1,695 on Property24’s leads model – this is incidentally the same cost as more than 25 leads a month generated on an agency’s listings. The source says a lead costs R8 on average. A lead is defined as a click on a listing, a click on a photo and clicking to view the agent’s telephone number or email address – of course, using the site’s contact form to message the agent directly is also deemed a lead.
Over and above this, a flat R699 is charged for office branding. This means that an average agency pays up to R2,394 a month to Property24.
Recognising that a number of online and single-office estate agencies (those that have one office with agents working remotely) have popped up over the past few years, Property24 management felt it needed to level the playing field.
Charles Scott, Property24’s general manager, tells HomeTimes that the online and single-office players have been able to list in various cities and provinces, and have only been paying for their single physical office – this has more than likely been one of the main reasons why they have been able to compete with traditional agencies on much lower commission structures.
“Online agencies don’t do any marketing other than use our system and that of Private Property,” says Scott, noting that these operators have been taking advantage of the Property24 leads model. “Charging for leads is fairer than a flat fee. The agency that gets far fewer leads due to being in a small town shouldn’t have to pay the same as one that gets many more.
“The reason [for changing the charging structure] is to ensure fairness and that everyone pays the every front door pricing model.”
To keep costs for online and single-office agencies from reaching prohibitive proportions – by applying separate charges for each small area in which a property is listed and got a lead – Property24’s solution was to establish “Online Business Areas” (OLBAs).
The portal divided the country into 42 unique OLBAS, thus widening the net in which these operators could do business and ultimately, if they received leads, would not end up putting them out of business.
“If such agencies list one or a number of properties in one or more of these areas, and receive leads on these listings, they are charged based on our standard leads model,” the Property24 circular reads.
But this has been done selectively, with the Western Cape broken down into 14 different regions, Gauteng 12, KwaZulu-Natal six, Eastern Cape four and Mpumalanga two. The Northern Cape, Free State, North West and Limpopo have not been broken up. For online and single-office agencies operating in Gauteng, Western Cape and KwaZulu-Natal, they are going to be subject to being charged for leads in a maximum of 32 different “regions”, or OLBAs.
According to Scott, the decision to change the way in which online and single-office estate agencies are charged did not come about as pressure from traditional agencies.
“This is our own initiative,” he says, explaining that the current OLBAs is a working model. “We’re experimenting right now.”
But by levelling the playing field in theory, some operators say it skews it in reality.
“It will impact our business by increasing our costs by some R15,000 per month,” says Cavan Sheahan of low-commission, online agency HomeBid. “HomeBid was designed to assist sellers and buyers to save money on the sale or purchase of their property. A low-commission estate agent like HomeBid is able to do this as technology allows us to list and market properties on various portals, giving maximum exposure for our clients’ properties at a minimum cost.We provide the same full service as high commission estate agencies except we ask the seller to show their property to the buyer as we believe they know their home and neighbourhood better than an estate agent. We do everything else to conclude the sale and save the seller R65,000 per R1m of the value of their home. At more than 50 sales a month, it’s working very well.”
New-kid-on-the-block, low-commission online player, PropertyFox, has been affected too, taking a far more pragmatic approach. “Property sellers need to list their homes where the buyers are,” says Crispin Inglis, co-founder of PropertyFox. “As the majority of South African home listings have now moved online, the competition for buyers’ attention becomes a matter of partnering with digital marketing specialists, like PropertyFox, to sell your home. With increased competition, understanding how to price and promote listings online is becoming more of an art (as is finding all the places that buyers find homes online). Online marketing and sales of homes is what we do. Our partnership with Property24 is important, but it’s just one part of how we market our sellers’ homes online.”
Neither agency says it will change its commission structure – each one using seller savings as their unique selling proposition.
“I believe that it is very important to give our clients the best service, especially when it comes to marketing their property,” says Sheahan. “At HomeBid we list on more than 12 major portals and believe this won’t change to make sure our clients get maximum exposure for their homes. We have no choice: We are small David against big Goliath.”
Likewise, PropertyFox currently has no plans of pulling support from Property24, as well as Private Property and the other portals.
“We also continue to invest in professional photography, valuation and agency services,” says Inglis. “We offer our home seller clients far more than a simple online listing and it frankly takes far more work than that to sell a home in South Africa.
“PropertyFox sellers are serviced by a team of experts who each specialise in the often complex steps in selling a home. We also make sellers part of that team; they simply show their homes to buyers after we screen and schedule their viewings. We can afford to charge low commissions because our team and systems are centralised and efficient, and because we pay our staff on salary, not on commission. Nothing will change that and we are only going to get better at what we do.”
Based on an online poll carried out by Entegral at the end of last year, an overwhelming majority (61%) of estate agent respondents stated that they believe they are not getting their money’s worth from online property portals; less than 10% say they are getting excellent value for money from paid portals.
Using Property24’s agents’ database, there are estimated to be some 5,500 active estate agent offices countrywide, representing more than 25,000 estate agents.
When the news broke last year that Property24 intended to acquire number 2 portal, Private Property – subject to Competition Commission approval – the industry expressed shock and concern that should the deal be approved, Property24 would enjoy a monopoly over the online listing space and could, theoretically, charge what it wanted to.
While Property24 admits that it neither received pressure from traditional estate agencies to change its charging model for online agencies, by the same token it seems that it never consulted the affected agencies either.
Sheahan says he was contacted by his assigned Property24 consultant to discuss the new charging model – not to get his input on how it would affect his business.
Property24 has had a love-hate relationship with estate agents for a long time: Agents have criticised the country’s largest portal of unilaterally hiking fees way above inflation and not providing links out to agents’ websites, but having to continue paying what Property24 wants because this is where buyers by and large begin their property search.
In a recent Property Professional article, Lew Geffen, chairman of Lew Geffen Sotheby’s International Realty, said the online portal wielded too much power, holding agents to ransom. He reminded readers (and no doubt warned portals) that, collectively, estate agencies pulled support en-masse from The Saturday Star – leaving its property section as a shadow of its former self – and transferred their listings online and in print to the Sunday Times Neighbourhood supplement.
In the Property Professional article, he called for the industry as a collective to retain its intellectual capital (the home listings) and revert back exclusively to print to “see how the market responds”. Geffen said he believes buyers and sellers would follow where agents went.
Should the Property24-Private Property deal be given the green light by the Competition Commission (many believe it will not pass competition muster), a monopolistic monster will be born. A player so big it will take its estate agent clients for granted, charging ever-rising tariffs and subscription fees, on a leads-based system that, arguably, has its own faults.
* Steeple did not respond in time before going to press
4 things all agents can and should be doing
#1 Invest in paid-for portals only as much as is minimally required, and on listings that are “worth it”
#2 Enhance your exposure to free listing portals
#3 Spend money on your social accounts, such as Facebook for Business, YouTube, Instagram and Twitter
#4 Enhance your image in your local operating area, advising potential buyers, sellers, tenants and landlords on community Facebook discussion boards, as well as in your local community newspaper