Domain hit as property listings outlook begins to soften

Nine Entertainment-majority owned property listing company Domain was sold down on Thursday as it flagged a more subdued outlook for real estate volumes.

Domain Group chief executive Jason Pellegrino sees a moderation in the residential property market.

Nine Entertainment-majority owned property listing company Domain was sold down on Thursday as it flagged a more subdued outlook for real estate volumes as the federal election approaches.

Domain shares dropped by 29c to $4.31 on the more cautious outlook for the residential market but it expects a shift to a more benign environment rather than a slow down.

Domain reported a 2.4 per cent lift in net profit to $19.5m for the first half, and its revenue was up 27.4 per cent to $176.2m but it is dealing with higher costs. The company expects fiscal 2022 ongoing costs to increase in the low-teens range from the fiscal 2021 ongoing expense base of $195.5m.

Domain chief executive Jason Pellegrino said trading in the first six weeks had reflected ongoing strong year-on-year growth in new for sale listings.

“Current leading indicators point to continuing favourable listings momentum,” he said. “However, year-on-year growth rates are expected to reflect the elevated base of comparison from fiscal 2021 fourth quarter when listings increased 45 per cent.”

Mr Pellegrino said Domain’s forward-looking indicators, including listings volumes, appraisals and open home inspections were pointing towards a moderation in the market.

Mr Pellegrino said that since Domain’s annual meeting update, strong market performance as Covid restrictions were eased in Sydney and Melbourne, and targeted investment decisions, had increased cost expectations by about $3m.

It put down the jump in costs to a mix of revenue-related expenses and targeted investment to accelerate the evolution of its Marketplace strategy.

Domain declared an interim dividend of 2 cents per share.

Macquarie analysts said that listings growth for the first six weeks of this half had been strong but the market surged in mid-2021, which is expected to affect growth rates in this half.

Domain had strong residential revenue as listings grew by 14 per cent in the first half and benefited from elevated activity in NSW and Victoria and selling more premium products, as well as from price hikes.

The company had a softer contribution from its rental business and other areas.

“Good result but subdued outlook although we suspect is already captured in consensus forecasts,” Macquarie analysts said.

Mr Pellegrino pointed to the company’s conviction in making strategic investments and flagged it would look to accelerate its organic platform, saying it also had an appetite for mergers.