Online Real Estate Agencies and their Impact on the Housing Market

Abstract

Online platforms have transformed many markets, as evidenced by the rise of firms such as Amazon, Uber, and Airbnb. However, the recent emergence of online real estate agencies has not yet received much attention. We investigate the impact of online agencies on the housing market. Our dataset consists of 1,274,792 properties in England and Wales, for which we have matched Zoopla listings with actual transactions from the Land Registry. Using an instrumental variable approach, we find that time on market (TOM) is shorter by about 80 days and the sale-list price ratio is smaller by about 2.4% for properties listed with online agencies. These findings, combined with an average fee of less than one-third of that charged by traditional agencies, explain why online agencies have rapidly gained market share. Their share has risen particularly for properties in the mid-price range and in regions with younger demographics. Moreover, we find that the rise of online agencies has caused traditional agencies to change their behavior - TOM and the sale-list price ratio are lower for traditional agencies in regions with a higher share of online agencies