The coronavirus pandemic changed the way we live and work, and there are questions being asked if some of these changes are permanent.
Shareholders in REA Group Limited (ASX: REA) and Domain Holdings Australia Ltd (ASX: DHG) should pay close attention. The virus could have a lasting impact on the online property websites.
Sellers are staging a revolt against high upfront marketing fees as the property market teeters on an edge of what could be a long and painful drop, according to the Australian Financial Review.
Fee pressure growing
This is forcing property agents to rely on marketing the property through their own networks of potential buyers instead of paying for listings on the country's two largest property websites.
Victoria's sudden move to ban private inspections of occupied homes will only add to the souring housing market sentiment. Auctions and open inspections are already banned nationwide to help control the COVID-19 outbreak.
REA Group and Domain have so far resisted calls from property agents to offer conditional free listings. One idea was to allow vendors to advertise for free on the websites for 45 days and only pay if the property sells.
REA and Domain protecting earnings
However, the AFR reports that REA Group and Domain are trying to find a compromise that would limit the impact on their bottom lines. REA gives vendors the chance to relist their property for free if it doesn't sell after a paid 45-day or 60-day campaign.
Domain is offering an option to withdraw unsold properties and listing them at a later date without an additional charge.
The two companies are holding out as house prices have yet to come under significant pressure from the pandemic, although the number of sales has plummeted.
Nothing like a crisis to force change
But volume is more important than price to advertising websites, so it may only be a matter of time before both will need to find another compromise.
Some property agents agitating for change due to their disdain of REA's and Domain's market power are not letting this crisis go to waste.
They want the giants to offer more friendly terms and are turning to free websites to put pressure on the market leaders. One example of a free website is Homely, which only charges when a property is sold.
If REA and Domain were to succumb, it could have a material impact on their bottom lines. What's more, the REA share price could suffer a de-rating as the stock trades at a premium to the S&P/ASX 200 Index (Index:^AXJO).
Investors should watch this space!
