Analyst says REA Group and Domain are unlikely to lead iBuying revolution

The US has set the standard for the Instant Buying (iBuying) market, and Australia is looking to take a page out of the book. Residential property portals are jumping at the opportunity to ease the process of buying, selling, and renting property from the comfort of their couch. However, according to Morgan Stanley analyst, Andrew McLeod, REA Group and Domain aren't going to be the ones leading the revolution.

US-based listings market leader Zillow, in which Australian investors such as hedge fund Caledonia Investments have taken significant stakes, stepped into the nascent iBuying market last year, but differences between the two housing markets made it unlikely REA Group and Domain would follow suit here, McLeod said.

His comments suggest residential real estate business is likely to undergo even more disruption as players not currently involved in the buying and selling of homes but who have great data-analysis capacity, see a way to make money in Australia's estimated $360 billion-real estate market.

"It’s a big opportunity and my prediction is that you will see companies offering this iBuying mechanism to real estate sellers – of residential real estate – in Australia in the next three years," McLeod said at the PropertyX conference hosted by e-conveyancer PEXA in Melbourne.

"It does work a bit better in the US market. It is high risk and I don’t think we’ll see it in Australia in the near term from either the listed companies REA Group or Domain."

iBuying is a convenience-based model under which tech-based platforms value homes and buy them upfront with cash settlement, before reselling them again. It accounted for 21,000 home sales in the US last year – less than 0.5 percent of all transactions – but was likely to grow to 5 percent by 2030, Morgan Stanley figures show.

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