Vendors may be forced to pay more for online advertising

The cost to market a property for sale could rise as the dominant online listing website plans changes to its pricing model.

REA Group has signalled it will link the cost of a premier listing on its popular realestate.com.au to the property’s sale price rather than the number of listings a real estate agent places on the site.

Outgoing REA Group managing director Greg Ellis said at an analyst’s briefing on the company’s half-year results, that it wanted to take a “flexible pricing approach” to its listings. He would not give a timeframe for the changes.

Only properties marketed through a registered real estate agency can be listed on realestate.com.au. Agents pass advertising costs through to vendors.

Australian Securities Exchange-listed REA Group has been moving from a subscription model for real estate agents to charging a fee per listing. Revenue from what it calls listing depth products increased by 67% between June and December 2013, with vendors paying more for premier listings with extra details and preferential positions on the site. Subscriptions revenue was down by 5%.

“We saw where the property advertising market was headed and made a deliberate decision to shift our focus from subscriptions to depth products which meet specific market needs,” Ellis said in a statement. “This strategy is now delivering excellent growth and returns for our shareholders.”

The company’s revenue increased by 30% to $209.4 million in the first half of 2014 compared with the previous corresponding period. Net profit was up 37% to $70.7 million. Earnings per share were 37% higher at 53.7 cents.

Real estate agents have criticised realestate.com.au in the past for fee model changes which resulted in price hikes. Some agents claimed fees for listings increased by as much as 42% in mid-2013.

Industry estimates put the current cost of listings at between $100 and $3,500 a month depending on the type of advertisement.

REA Group told analysts it was offering greater value to customers by providing additional research data such as supply and demand metrics, and dramatically increasing its audience reach.

Total page visits per month to realestate.com.au increased by 37% to 39.7 million at the end of the December 2013, compared with the same time in 2012. The site accounted for almost 80% of total minutes spent on Australian property portal sites.

This article first appeared on Property Observer.

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