Housing slowdown will affect McGrath’s half-yearly earnings

John McGrath says EBITDA will be 50 per cent lower in the current half than at the same time last year.

McGrath Real Estate chief executive John McGrath conducts an auction. Picture: David Swift

Listed real estate agency McGrath has warned that the tough property market will hit its earnings for this half as the property market slows.

McGrath said underlying earnings before interest, tax, depreciation and amortisation would be at least 50 per cent lower in this half than the same period last year.

The company will focus on keeping costs in check and growing its franchise footprint, and is confident it will remain profitable in this half.

“The property market is taking a widely expected and much needed breather after a rapid growth over the last three years,“ McGrath chief executive John McGrath said.

“Based on the latest listing data, it certainly appears that there has been a late start to the Spring selling season and there is still some uncertainty as to whether we will see a late surge of activity as we have seen in prior years.”

The high-profile Sydney agent is confident of a comeback.

The tough property market will hit McGrath’s earnings. Picture: Gaye Gerard

“However, there are green shoots appearing despite the difficult market conditions, with sellers now more prepared to meet the market,” he said.

Mr McGrath said the company was gaining share in key markets, using well-known agents and more franchise partners on Australia’s east coast.

McGrath said in August that property market headwinds which buffeted it up to June were rolling into this financial year, and that its earnings from this half were likely to be “materially lower” than a year ago.

The company blamed interest rate rises since August for dragging out the challenging market conditions.

Recent data showed the flow of new listings were tracking lower than previous periods. Home listings are about 15 per cent below the previous five years’ average and, at the same time, average residential selling prices have fallen.

The company has about $30m in cash and no debt, and will continue with its on-market share buyback.

“Our solid financial position will allow us to withstand the short-term market volatility and provide opportunities to capitalise on opportunities to grow our earnings and increase shareholder value, while we expect market conditions to improve over the remainder of the financial year,” Mr McGrath said.