Domain Holdings reports property listings struggle outside of Sydney and Melbourne

The housing market is becoming polarising with more homes coming up for sales in Sydney and Melbourne, while less wealthier cities feel the force from RBA rate rises, according to Domain.

Nine Entertainment-controlled property portal Domain Holdings has seen ongoing growth in new sale property listings in Sydney and Melbourne as the prospect that interest rates are at the peak lifts confidence for homeowners.

The company also warned that the housing market is more polarised as cost of living pressures create challenging conditions across the rest of the country, notably in Queensland, which resulted in national listings decline by about 2 per cent.

It came as Domain reported profit rose to $24.4m for the six months to December 31 from $14.2m over the same period a year earlier. The result was slightly less than the $25.3m that markets had expected.

Revenue increased 11 per cent to $202.2m, while underlying earnings jumped 32 per cent to $68.4m — both of which were 1 per cent less than expectations.

Domain chief executive Jason Pellegrino said that while Melbourne and Sydney rebounded over the period with volumes up nearly 30 per cent year-on-year, other markets remained impacted by the Reserve Bank’s rapid run of interest rate rises since May 2022.

“Sydney, Melbourne always leads the Australian property cycle, they lead price declines and also listing volume declines last year. So Sydney’s first down and it’s the first up and Melbourne follows behind,” he told The Australian.

“Other markets have remained challenging, impacted by rising interest rates and cost of living pressures,” he said.

Domain CEO Jason Pellegrino said there are signs listings are on the up. Picture: Supplied

Mr Pellegrino said that cost of living pressures and rates have created polarisation in the market as wealthier suburbs with less mortgage pressures perform better than areas with a higher reliance on mortgages.

“In areas with high median property prices, this is particularly the case in Sydney and Melbourne, you are seeing great outcomes, strong listings, good prices and good attendance at open-home inspections,” he said.

“If you go out to areas where there is probably a high reliance on mortgaging and mortgage finance activity to purchase properties, you are seeing weaker activity.”

Mr Pellegrino said that the prospect that interest rates were at the peak was increasing confidence in the property market, as Domain observed signs that the rest of the country were slowly following the lead of Sydney and Melbourne.

“People have come to the view that we’re at the top or near the top, and so their ability to forecast the future is heightened,” he said.

“It’s not about where interest rates are at or what direction they’re heading. It’s more the certainty that I’m not expecting an unknown or unexpected outcome or series of outcomes in the future.”

Domain said that the improved outlook for listings will help to fuel earnings margin expansion for the remainder of the financial year, along with price increases, uptake of new depth contracts and products, and continued cost restraint balanced with investment in its marketplace strategy.

Cost guidance for the financial year is unchanged, with an expected increase in the mid to high single digit range from the past financial year expense base, excluding discontinued operations, of $237.1m.

Market analysts noted that Domain continued to struggle against rival REA Group, which is majority-owned by News Corp Australia, publisher of The Australian, with listing volumes about 2 per cent below it.

A narrow earnings miss combined with a pullback in listings saw investors move to sell Domain in morning trade on the ASX, with its shares down 2.3 per cent to $3.28.

“Domain listing volume growth continued to underperform REA Group at negative 2 per cent year-on-year, which we view due to continued challenges for the group in Tasmania, WA and Queensland,” UBS analyst Lucy Huang said.

“We also note that Platinum penetration had decreased this half compared to the previous period in Melbourne.”

Domain will pay an interim fully-franked dividend of 2c a share, flat from a year earlier.