Buying and selling property is a stressful and expensive experience for most of us. While conveyancing is only a small part of the process, it is important that governments across Australia take steps to make the process more efficient and less costly while ensuring it remains secure.
Electronic conveyancing, known as eConveyancing, brought property transactions into the 21st century by minimising paperwork and allowing parties to transact together online.
More than 1.7 million eConveyancing transactions were processed nationally in 2019, and that volume is continuing to grow. New South Wales alone has a total land value of $2.24 trillion and requires all mainstream land dealings to be lodged electronically. Given the sheer volume of transfers, the cumulative benefits from even a small reduction in transaction costs are sizeable.
The eConveyancing market is at a turning point, with reform needed to promote effective competition in the market.
eConveyancing transactions are lodged with the land registry via what is called an Electronic Lodgement Network Operator (ELNO). Australia has only two ELNOs. The dominant operator in the market, PEXA, was established by Australian governments in 2010 and was privatised in 2018. Sympli is a more recent entrant, but has already established much of the back-end infrastructure required to operate nationally.
As it stands, the competing ELNO systems do not ‘interoperate’ — so all buyers, sellers, and the banks must use the same operator to interact with each other.
Imagine if phones on one network could not place calls to phones on another. Consumers have strong incentives to pick the provider most used by other parties. That’s the key issue in the eConveyancing market.
A lack of interoperability gives the incumbent, PEXA, a powerful network advantage and diminishes the competitive pressure upon it. Rather than having to offer the best service or the lowest price, an incumbent could retain its position simply because it is often too cumbersome for parties to agree to change operators.
Competition is the backbone of Australia’s market economy. It lowers prices and drives innovation which in turn improves our productivity, income, and living standards. In the absence of effective competition, regulation is sometimes required to ensure an incumbent firm cannot exclude new entrants solely by virtue of already being established.
Governments across Australia have already chosen to mandate interoperability between ELNOs and all have approved the current Bill before NSW Parliament to enable this. Of the options considered, mandating interoperability was found to have the greatest net benefits across the Australian economy, including $94 million from reduced transaction costs and $30.8 million from time savings and product improvements over 10 years.
Interoperability has the support of key industry stakeholders, including the Law Council of Australia, the Australian Institute of Conveyancers, and the Australian Banking Association. The model is strongly supported by the ACCC.
Given our interest in productivity-enhancing competition reforms, the model is also supported by the NSW Productivity Commission. In the 2021 White Paper, the NSW Productivity Commission recommended that the NSW Government support the implementation of interoperability in the NSW eConveyancing market, as a matter of urgency. A Bill to implement interoperability is currently before the NSW Parliament.
When it was introduced in 2010, eConveyancing was world-leading. If we want to set up eConveyancing for the future, we need to ensure the market is open to competition. An interoperability framework that promotes robust competition in eConveyancing services is the logical and necessary next step in this reform.
The reform would improve productivity and deliver better outcomes for consumers and businesses. It reflects extensive analysis, consultation, and research. Interoperability is backed by a substantial weight of evidence, and parliament should not delay taking action to realise its benefits.