The Times Australia
The Times Australia

.

Advertising a house is ridiculously expensive in Australia – could that be affecting the property market?

  • Written by James Graham, Senior Lecturer in Economics, University of Sydney

Australia has long been one of the most expensive[1] places in the world to buy a house. Now, it’s apparently also one of the costliest places to sell one.

Recent reporting[2] in the Guardian has raised concerns about the market dominance of Australia’s two main real estate advertising websites, realestate.com.au and Domain.

Facing little competition, the largest – realestate.com.au – appears to have significantly increased its fees[3] in recent years, while thwarting disruptive innovations from smaller competitors.

Why does that matter? Because when it comes to selling a house, Australia stands out[4] globally. In most other countries, any advertising costs are tiny or bundled in with agent fees.

Here, along with only Sweden and New Zealand[5], home sellers pay their own advertising costs in addition to real estate agent fees and commissions.

This advertising can be expensive – up to several thousand dollars for a single property listing. But it also seems necessary, with a lack of alternative platforms offering comparable reach.

Setting aside the problems of monopolistic pricing behaviour, what are the economics of high and rising real estate advertising fees? Do home sellers get value for the money they spend on advertising? And what might be the impacts of these fees on the Australian housing market?

Is advertising on big platforms worth it?

First, it’s worth asking whether real estate advertising is actually effective and whether bigger platforms are better.

To explore these questions, a group of US-based economists studied[6] the outcomes of advertising on a large platform favoured by real estate agents in the United States called the “multiple listing service”, compared with a smaller for-sale-by-owner platform.

A gavel is held by an auctioneer
In the US, real estate agents take care of listing properties on industry-owned databases. Mick Tsikas/AAP[7]

The study found no differences in eventual home sales prices between the two platforms. But properties on the multiple listing service were more likely to sell and spent less time on the market.

However, the size of the advertising platform didn’t explain these benefits. Rather, the different platforms appealed to buyers and sellers with varying patience levels. This variation in willingness to “wait-and-see” affected the time it took to sell.

Translated to the Australian context, that raises questions about the value for money of advertising on a larger platform – which here, unlike the US, attracts significant fees.

Housing markets are ‘search markets’

Next, we need to consider how high costs of advertising property might affect the housing market more broadly.

Housing markets fall into a category called “search markets” within economics. Sellers seek buyers, and buyers seek sellers offering up properties that meet their required criteria.

Suburban Australian homes seen from above
Property markets hinge on connecting buyers with appropriate sellers. zstock/Shutterstock[8]

The economics of search markets have been extensively studied by the likes of Nobel laureates[9] Peter Diamond, Dale Mortensen and Christopher Pissarides. Their insights highlight the key factors that determine search market outcomes.

Sellers consider the costs of listing an item for sale (such as advertising) and the time it takes to find a buyer. Buyers, on the other hand, consider their alternatives to buying (such as renting) and the time it might take to find a suitable seller.

The likelihood of a sale – and how long everything will take – depends on the number of potential buyers relative to sellers. The sales price is then negotiated after meetings between the two.

This gives us a framework to speculate about how Australia’s high – and increasing – costs of advertising real estate could be affecting the broader housing market on both sides of this equation.

Costs can affect both supply and demand

On the supply side, high fees reduce the net financial benefit of selling a home, which could discourage homeowners from listing their properties. All else being equal, this could lead to fewer properties on the market, shorter selling times, and higher prices for the properties that are listed.

But we can predict some effects on the demand side, too.

High fees also reduce the net benefit of buying a home, as current buyers expect to be sellers in the future. These costs are likely to be even more pronounced for property investors, who buy and sell property more frequently than homeowners.

Anticipation that selling costs will be high in the future could suppress the demand for housing, reducing prices and increasing the time it takes to sell a property.

Interestingly, recent research[10] from the US suggests that these demand-side effects might outweigh the supply-side effects.

Economists studied the impact of a series of court decisions that forced the National Association of Realtors to reduce real estate agent fees. They found lower fees increase the lifetime benefits of homeownership, which leads to a significant increase in house prices.

Significantly, that suggests lowering the costs of selling property – including advertising – could increase property values.

Just one part of the housing story

High prices in any area of economic life are likely to rankle our sense of a fair deal. High fees for advertising real estate have an obvious immediate impact on a home seller’s wallet.

But the nuanced flow-on effects to the broader housing market are harder to tease out. They are also likely to vary across different property markets within Australia. Commentators and policy makers should think carefully before leaping into action in this area.

In the meantime, advertising fees are one more thing to keep an eye on as Australian housing costs continue to rise.

References

  1. ^ most expensive (www.forbes.com.au)
  2. ^ reporting (www.theguardian.com)
  3. ^ significantly increased its fees (www.theguardian.com)
  4. ^ stands out (www.theguardian.com)
  5. ^ Sweden and New Zealand (www.theguardian.com)
  6. ^ studied (www.aeaweb.org)
  7. ^ Mick Tsikas/AAP (photos.aap.com.au)
  8. ^ zstock/Shutterstock (www.shutterstock.com)
  9. ^ Nobel laureates (www.nobelprize.org)
  10. ^ recent research (www.nber.org)

Read more https://theconversation.com/advertising-a-house-is-ridiculously-expensive-in-australia-could-that-be-affecting-the-property-market-239111

Is there any hope for a fairer carve-up of the GST between the states?

When the Western Australian state government handed down its state budget on Thursday, it showed a balance she...

Times Magazine

What AI Adoption Means for the Future of Workplace Risk Management

Image by freepik As industrial operations become more complex and fast-paced, the risks faced by workers and employers alike continue to grow. Traditional safety models—reliant on manual oversight, reactive investigations, and standardised checklist...

From Beach Bops to Alpine Anthems: Your Sonos Survival Guide for a Long Weekend Escape

Alright, fellow adventurers and relaxation enthusiasts! So, you've packed your bags, charged your devices, and mentally prepared for that glorious King's Birthday long weekend. But hold on, are you really ready? Because a true long weekend warrior kn...

Effective Commercial Pest Control Solutions for a Safer Workplace

Keeping a workplace clean, safe, and free from pests is essential for maintaining productivity, protecting employee health, and upholding a company's reputation. Pests pose health risks, can cause structural damage, and can lead to serious legal an...

The Science Behind Reverse Osmosis and Why It Matters

What is reverse osmosis? Reverse osmosis (RO) is a water purification process that removes contaminants by forcing water through a semi-permeable membrane. This membrane allows only water molecules to pass through while blocking impurities such as...

Foodbank Queensland celebrates local hero for National Volunteer Week

Stephen Carey is a bit bananas.   He splits his time between his insurance broker business, caring for his young family, and volunteering for Foodbank Queensland one day a week. He’s even run the Bridge to Brisbane in a banana suit to raise mon...

Senior of the Year Nominations Open

The Allan Labor Government is encouraging all Victorians to recognise the valuable contributions of older members of our community by nominating them for the 2025 Victorian Senior of the Year Awards.  Minister for Ageing Ingrid Stitt today annou...

The Times Features

How to Know If You’re Actually on Track for a Comfortable Retirement

Image by Drazen Zigic on Freepik It’s the kind of question that sits in the back of your mind, especially as you tick past your 30s or 40s: Am I actually saving enough for retire...

Onsite Caterer vs a Full Service Venue: 9 important things to explore

Choosing between an external catering company and an all-inclusive venue is a major decision that affects cost, flexibility, food quality, and the overall event experience. Venue...

The Hidden Vision Problem Impacting Mid Life Australians Every Day

New research from Specsavers reveals millions of Australians are living with an undiagnosed condition that could be putting their safety at risk. For many Australians aged 35 ...

Meal Prep as Self-Care? The One Small Habit That Could Improve Your Mood, Focus & Confidence

What if the secret to feeling calmer, more focused, and emotionally resilient wasn’t found in a supplement or self-help book — but in your fridge? That’s the surprising link uncov...

From a Girlfriend’s Moisturiser to a Men’s Skincare Movement: How Two Mates Built Two Dudes

In a men’s skincare market that often feels like a choice between hyper-masculinity and poorly disguised women’s products, Two Dudes stands out. It’s not trying to be macho. It’s n...

The Great Fleecing: Time for Aussies to demand more from their banks

By Anhar Khanbhai, Chief Anti-Fleecing Officer, Wise   As Australians escape the winter chill for Europe’s summer or Southeast Asia’s sun, many don’t realise they’re walking strai...