Lack of transparency holding the South African estate agent industry back
Data is the new oil, and in real estate there is plenty of data going around, all the way from the lead & listing side (estate agents & service providers) to the finance side (bank & bond originators) to the legal side (attorneys & deeds office).
As we already know, the one who controls the data and more importantly, the sales funnel, will reign king. Wall Street has woken up and see real estate commissions as low hanging fruit. They are throwing money at the iBuyer and other tech driven models that challenge the status quo. Having all the data means leverage to launch new initiatives or to put more money into marketing your portal (so agents can spend more promoting their listings).
The one who has all the data can claim the consumer eyeballs. It is a chicken and egg scenario: for any portal to succeed they 1st need all available listings in the market to drive SEO and user value. Agents will reluctantly support any portal that does not have a proven lead generation history. At the same time, there are calls for an industry-owned portal, but this needs two things: funding and all listings to get it off the ground.
Lack of transparency in portal ownership
In South Africa, the industry organisation REBOSA has decided to exclusively support one industry portal, Private Property. This was done through shares bought by large franchises and the two dominant bond originators, Ooba & Betterbond in 2017. This was at a time when Property24 tried to buy Private Property from under everyone’s noses. Although a potential property monopoly was prevented it has still left Caxton with a problematic 50.01% majority stake.
REBOSA has promised that shareholding will be offered to all (after questions were raised). It has been delayed several times and one wonders how such a deal would look like in order to protect the current shareholding value. Quite a tough problem to solve. Will the Caxton 51% majority share also be unlocked to make it a majority industry owned portal?
With so much money injected into Private Property, why support any other portal? Excuses like, ‘it will be too expensive’ is used. (Fact is, one doesn’t need over R100 million to launch a new 100% industry owned portal and it is not an impossible task, as stated by the opportunistic few). This does however create a major problem for the rest of the industry and puts a damper on any new initiatives with existing or new portals.
Right now, most independent agencies, and independent franchises are unknowingly funding their competitors through:
- Paying subscription fees to a portal they have no shareholding in and not paid any dividends from it.
- Supporting the two largest bond originators or their aggregators, since these two bond originators have shareholding agreements with various top franchises.
- Supplying their listing data not knowing where else in the value chain it is used.
I think it is paramount for all property portals and bond originators to clearly disclose their ownership, especially when there is a conflict of interest as stated above with agents unknowingly funding their competitors. Smoke screens are put up to protect the interests of the shareholders and until there is full disclosure, we may have a case of collusion that is clearly holding entrepreneurship and fair competition back.
Who owns my listing data?
There has never been a better time to ask this than last year, when the whole FNB issue broke. FNB launched a private selling feature right under the noses of their listing data supplier, Private Property:
Red faced executives had to meet behind closed doors to discuss whether they are going to remove the bulk agent listings (transcript anyone?). A whole week later the data was removed. In my humble opinion, data should have been removed immediately upon agent requests, it is their data after all. I’ve questioned the value of the FNB deal but REBOSA/Private Property declined to answer.
This was a clear example of how a company can piggyback on agent data to launch their own initiative if there is no transparency or rules set in place for data usage. How else is your data used, given the shareholding and relationships between franchises, bond originators and portals pointed out? The FNB listing issue only came to light due to the public app that was launched. A big warning sign was sent out but, to date, and to my surprise no answers and no action to prevent something like this from happening again. No transparency. To say that we have a huge problem regarding data ownership in the real estate industry due to the lack of transparency, is an understatement.
Agents should ask a lot more questions, like where else in the sales funnel their data is used (not just listing data but actual sales data supplied to portals & originators)? Which other portals or systems have shareholding from agencies or originators and how does it benefit the shareholders financially? Do I support a truly independent bond originator that doesn’t fund my competitors? How could all this affect my agency in the long run?
Should real estate data be open?
Should real estate data be open for all to consume (e.g. tech startups to build innovative new products) or remain under monopolistic control of a few?
One can for instance setup a national, non-profit Real Estate Listing Data Exchange. In my view, this could stimulate more competition and can inherently solve a lot of the transparency and control issues. Let’s take real estate data in its simplest form, listings, and the net effect it could have if we open it up:
- Benefit to consumer: All property portals would gain access to all listing data available in the country and focus on building more competitive portal websites, making finding a home a whole lot better based purely on the user experience the portal offers. There are many other benefits which I can discuss in a next blog post.
- Benefit to agents: It could address high portal fees with more competition introduced to the market. It could result in a radical shift in portal dominance. It could lower the cost barrier of entry for new real estate agencies.
- Benefit to the tech industry: We can start building cool innovative tools for agents and consumers that can possibly stimulate job creation.
Now the downside to the above could be that it would open the door for ‘disruption’ as we know it. My thinking is, that as long as you give agencies the choice on where their data feeds and enforce consumer privacy, transparency and fair use through industry standards it will be a win-win solution for all. It is all about control, but not from the top, from agent level.
Above all, it is about transparency, and the South African real estate industry desperately needs this.
If you think it is critical to address transparency in the South African real estate industry, please consider joining the The Real Deal Facebook group and share your views. Maybe you have an opinion on other pressing real estate matters, we’d love to hear. Please feel free to contact me if you’d like to contribute opinion pieces here.