The most expensive market

A lot is made of how expensive the Sydney property market is on a global scale. There is a second market that Sydney is a world leader in when it comes to expensive – real estate internet advertising. Homeowners pay more to market their homes on the internet in Sydney and Australia, broadly speaking, than just about anywhere else in the world.

In the days of newspapers, agents became addicted to a model called VPA. That’s Vendor Paid Advertising. The agent convinced the client to spend excessive amounts of money on advertising their home, using the ‘old chestnut’, more advertising equals a higher price.

Homesellers collectively ‘invested millions of dollars’ each year thinking they were selling their home when they were actually buying advertising. The seller inadvertently paid to build the agent’s profile and branding, regardless of the success of the sales campaign.

Then the internet became the dominant marketing tool and essentially wiped newspaper advertising out. Now everything old is new again as VPA has returned with a vengeance and a digital veneer. Agents are now looking to outspend each other on the internet with bigger ads at the owners expense. That would be fine if the homeseller and agent gained a joint benefit from all this advertising. Alas, homebuyers are interested in the property not the size of the advertisement.

Real estate internet advertising expenditure has exploded in the past 20 years from nothing to being billon dollar companies. Some individual web ads cost as much as $2000. On a global scale, this puts Aussie home sellers at the top of the heap when it comes to outlay for real estate advertising on the internet. One stockbroker made insightful comments prior to the release of the recent Fairfax results. The firm was looking for ‘any indication that real estate agents were beginning to resist price increases’ from Domain.

While everyone is asking, how high can house prices go? Others are asking, how high can these advertising rates go?

Agents may be showing subtle signs of stress at the price increases. Off market transactions are increasing as agents aim to use their database as opposed to chase excessive VPA. Neither consumers or agents are showing an appetite for annual price increases three times the rate of inflation.

Opportunists sense the gap in the market too. This is why your television and radio is awash with discount agents and referral firms promising the ‘same for less’ as full service realtors.

The key when assessing the right campaign for your home is the outcome you desire. Once you are clear on that, pick the most economical and efficient path to that outcome. If a total marketing campaign delivers genuine buyers to your doorstep for $2000, why spend $5000 or $10,000? If someone, asks you to spend $5000 ensure they justify the extra expense. If expensive internet advertising is such good value, let the real estate agent pay.  They’re the party getting the most benefit from it.

One thought on “The most expensive market

  1. Tim Saunders

    Brilliantly put Peter, why should home sellers be held hostage to the duopoly that exists in the market today, simply VPA has a new outlet – online, rivers of gold again for all the wrong reasons.

    Reply

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