‘Sleep-walking into a monopoly’: competition fears spark home-buyer warning
By Josh Dye
June 30, 2019
The introduction of mandatory electronic conveyancing on Monday has sparked fears that a lack of competition could cost home-buyers more in the long-term.
The transfer of property ownership in Australia was traditionally conducted using paper forms, but from July 1 must be done online in NSW.
However customer Service minister Victor Dominello has warned of the “grave risk” of creating another Telstra-like behemoth, given the online property exchange network is an effective monopoly, controlled by a company called PEXA.
PEXA was born in 2010 out of federal and state government desires for a national e-conveyancing platform. Until last year, it was owned by various stakeholders including state governments and the big four banks, before it was fully privatised and sold to a consortium.
While no one disputes the benefits of e-conveyancing, there are major concerns PEXA lacks an effective competitor, which Mr Dominello believes gives PEXA an unfair market advantage.
“There is a grave risk we are sleep-walking into a monopoly which would have a very bad outcome for the people of our country,” Mr Dominello told the Herald. “I just don’t think it’s healthy to have a situation where there is no choice.”
PEXA chief executive Marcus Price said his company has committed to “never increase prices beyond CPI”.
*”This is enshrined in regulation and through the contracts we have with each of our members,” Mr Price said. “Ultimately, as an industry we must advocate for a model that first and foremost serves homebuyers without introducing new cost, risk or complexity into the process.”
Late last year, there was a new entrant to the market – a company called Sympli – but major competition concerns remain.
I can’t think of any good that would come out of creating a corporate behemoth.NSW Customer Service minister Victor Dominello
The key to improving competition appears to be interoperability. That would mean forcing PEXA’s and Sympli’s systems to integrate with each other, in the same way you can call and speak to someone who uses a different mobile phone network.
“I can’t think of any good that would come out of creating a corporate behemoth, such as [another] Telstra,” Mr Dominello said. “Ultimately it would be a perverse outcome if we have a Telstra and an Optus, but Optus [people] can only speak to Optus people and Telstra can only speak to Telstra people. We do need that interoperability and we do need competition.”
The Australian Competition and Consumer Commission has previously weighed in, urging the regulator to adopt interoperability which it described as “essential”. The competition watchdog criticised the fact that PEXA had “already commenced operations prior to regulatory measures being resolved”.
Without enforced interoperability, new competitors will face “significant barriers”, commissioner Cristina Cifuentes wrote.
“Even if the new [competitor] can offer a better price or a better service, the incumbent [PEXA] will already have the network advantage of a greater number of users and will be able to leverage this advantage, as each party to a transaction must use the same [network].”
As the largest state, NSW’s mandatory adoption of online conveyancing marks a critical juncture for the industry, because in the absence of a solution, PEXA gets first bite at the lucrative NSW property market.
Although NSW has taken the lead in lobbying for interoperability, there is frustration in the industry that it’s taking so long to act. The industry regulator, ARNECC, is conducting a national review, which is due to be released in coming weeks.
‘The worst-case scenario’
Paul Bollen, director of East Coast Law, a large provider of conveyancing services in NSW, online conveyancing is a positive step.
However, he is concerned PEXA’s monopoly position will come back to bite home-buyers.
“I think it could be a money pit that they could dip into and increase fees and charges, which are ultimately passed onto the client. That is the worst-case scenario,” he said.
The digital transition doesn’t come without risks, either.
Last year, PEXA suffered multiple serious security breaches when hackers broke into the online portal and stole millions of dollars.
Despite that, Mr Bollen supports the industry moving online, but he wants choice and competition.
“If we’re faced with a monopoly and PEXA is the provider, then we don’t have a choice,” he said.
*He also criticised the NSW government for mandating the system too quickly, saying it “should have been pushed back” until competition concerns were resolved.
ARNECC failed to answer a series of questions from the Herald, with a spokeswoman saying it would take four days to get a response.
Josh Dye is a news reporter with The Sydney Morning Herald.