Is this the beginning of the end for REA Group Limited?

REA Group faces opposition from real estate agents

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Storm clouds are rumbling over REA Group Limited (ASX: REA), the owner of property portal, realestate.com.au.

According to the Australian Financial Review (AFR), the company is facing a serious challenge from real estate agents in Melbourne, with 300 agencies appointing a third-party representative to negotiate fairer ad prices with REA Group.

Thanks to its strong market position – the company is estimated to control 61% of the online property advertising market – REA Group has managed to increase prices consistently for ten years. Some estimates put the price increases at 9,000% in five years. But recent changes to its pricing structure, which involves steep price hikes have incurred the ire of the industry.

Now 62 real estate brands with a combined ad spend of more than $100 million a year, are collaborating to bring about cheap, fairer and more equitable prices. REA Group also recently announced that it was raising rates for properties in upmarket suburbs, with agents charged on the location of the listing rather than the location of their office.

At the same time, the AFR reports that talks of new ventures setting up to compete with REA are rising. Real Estate Industry Victoria, which runs property portal realestateview.com.au and adviser Right Click Capital have been in talks with international media companies with a view to expanding its website.

Domain, REA Group's main competitor, owned by Fairfax Media Limited (ASX: FXJ) has called on real estate agents to 'unplug' REA, with Domain CEO Antony Catalano calling increases of up to 60% 'extortionate'.

New Zealand's Trade Me Group Ltd (ASX: TME) is in a similar situation to REA Group – with its recent dispute with real estate agents threatening to sink its online property market share. That dispute is yet to be resolved, but REA Group's problems may only be beginning.

Despite the share price falling more than 14% since its 52-week high of $52 in early March, more clouds are approaching REA Group.

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »