by Matthew Cranston
Australia-based investors have increased their shareholding in US-based real estate platform Zillow to 40 per cent from 30 per cent last year as the company's pool of data and potential growth outmuscles any attempts by the likes of Facebook to break into the property market.
Zillow chief executive Spencer Rascoff, whose visit to the Australian investor base in Sydney coincides with the listing of Fairfax Media spin-off Domain Holdings on Thursday, said it was Zillow's powerful data that would fend off any competition and help fuel the 25 per cent year-on-year revenue growth it has been reporting.
"Data is the new oil. It is the store of currency and the creator of value for companies in the 21st century," Mr Rascoff said, "And our Australian investors identified that. More people in the US type the word 'Zillow' into Google than type the word 'real estate' into Google. Zillow is now a verb."
"What differentiates us from any other sites you see is that there's a price on every rooftop – even if its not for sale."
Zillow has gathered a collected pool of data on every single home in the US – about 110 million – and has a daily price estimate called a "zestimate" on each of them. This core data, presented like a Google satellite map, attracts more than 175 million average monthly unique users and buyers' agents are now clambering to pay Zillow a collective $800 million a year just for the right to have their details near properties in the hope of being the conduit for a sale.
Current houses listed for sale on Zillow are only about 3 million (some even indicate foreclosures), but in the US the real estate system works differently to Australia with buyers doing a lot more of the work to trigger a home sale and get it into the market. There, commissions on sales are paid by the buyers not the vendors.
"The problem for a buyer's agent is it's difficult for them to attract buyers and that's what we come in."
The company, started by the former management team of travel site Expedia, has a market capitalisation of more than $7 billion now and has seen its share price steadily rise with key Australian investor Caledonia, whose chief investment officer is Will Vicars, holding a 22 per cent stake up from 14 per cent earlier in the year.
Others including Gretel Packer (brother James sold his stake to her) and several smaller private investors and funds have increased their holdings, too.
While there is strong backing from Australia Mr Rascoff said there was no plans to take on locals Domain and Realestate.com (for which Zillow owns the name sake in the US).
"Fortunate for us we have six brand names so if we were ever to compete in Australia we have other brands to choose from," Mr Rascoff said.
But at this stage Australia is not on the cards. Not that Domain and Real Estate.com could not be tackled, but Zillow has bigger fish to fry.
The addressable market is huge, the company has virtually no debt even though US house prices are now past their pre financial crisis peak, Mr Rascoff said the market was now much more stable.
"The 2007 peak was built on a foundation of sand. And while home values are past those people levels of 10 years ago it is a much more sustainable.
"An increase of 50 basis points in mortgage rates to 4.25 per cent would increase monthly mortgage on the average American house by $50. My point being it's not as dire as some predict. Some people say oh my word! Mortgage rates are going up, home ownership will become unaffordable this is a huge problem. Our data says that it will take many many years of sustained mortgage rate increases."
And considering Zillow is almost more data than real estate Mr Rascoff was sure to counter any views on share price bubbles for big data companies.
"That doesn't mean that there are companies whose valuations are irrational – I'm sure there are but almost every great company today is being built with data at its core. "No agents want to pay with bitcoin yet, but if they did I'm sure we would take it.
"I think the block chain more generally not necessarily because the block chain has the potential to disrupt huge industries including financial services and maybe title insurance in the real estate space.
"Today it's it's a speculative currency that has been derived out of block chain and people are making a lot of money speculating on it."
At this point, integrating bitcoin and blockchain into Zillow is something Mr Rascoff is figuring out.
"Thats not fully formed but I'm trying to figure that out."
Read more: http://www.afr.com/real-estate/australians-up-zillow-stake-with-data-on-every-home-in-america-20171112-gzjzd5#ixzz4ykTkkDBI
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