REA Group on track as ‘heat’ comes out of property market

The digital real estate advertising group says it is well positioned as the market moderates and sellers spend up on its products.

REA says it is well-positioned for growth despite the slowing residential property market after the online realty group unveiling a lift in earnings on Wednesday.

The company said core operations lifted revenues by 16 per cent to $305m, while EBITDA was up 11 per cent to $174m.

REA chief executive Owen Wilson noted the traction premium products had gained as sellers sought to differentiate their properties. “The listings environment was positive in the first quarter, with supply and demand continuing to rebalance in the major metropolitan markets,” he said. “We’ve seen the heat come out of the property market in recent months and while positive underlying fundamentals remain, we expect this moderation to persist as interest rates rise.”

Mr Wilson said the market was reflecting rate rises, which had prompted some people to put off selling. While this had driven relatively weak listings in the short term, he said they would inevitably come back, likely later in this financial year. Mr Wilson expects the driver of a listings return will come when a general consensus emerged that interest rates had either peaked or neared their peak.

Meanwhile, REA was “well positioned” and investing in new businesses. It is investing more in India and, while the US market has slowed, the main operations in Australia had a 14 per cent revenue lift, with all businesses growing except for financial services, although this may tick up as homeowners refinance next year.

National listings rose 5 per cent during the quarter, reflecting last year’s state lockdowns. Sydney listings were up 5 per cent and Melbourne jumped 12 per cent.

The local residential business had strong revenue growth, aided by a 6 per cent average price rise in the products from July, and greater take up of more advanced products by home sellers.

Rent revenue was also up on the back of a 5 per cent price rise, although this was tempered by a 1 per cent decline in listings. The flagship site, realestate.com.au, kept its leadership position, with an average monthly audience of 12.4m using it for more services.

“During the quarter we saw continued strong growth in active members and property owner tracks, demonstrating the depth of interaction our audience has with our personalised experiences,” Mr Wilson said.

National residential listings in October were down 18 per cent year-on-year, with Sydney and Melbourne smashed. Picture: John Gass/NCA NewsWire

REA cautioned the Australian residential property market has seen property prices and volumes decline after the rapid rise in interest rates. Further hikes may see the trend take hold, but it said housing was supported by positive fundamentals including low unemployment, high household savings and increasing international migration underpinning demand.

National residential listings in October were down 18 per cent year-on-year, with Sydney listings off 31 per cent and Melbourne down 29 per cent, reflecting a rush last year as lockdowns ended.

REA’s growth rates for the remainder of the year will reflect the strong prior period listings volumes, and it said residential yield growth on products was anticipated to grow at a double-digit rate this financial year.

The company is targeting full year positive operating jaws for Australia in fiscal 2023, with local operating cost growth trimmed and now expected to be mid to high single-digits.

In India, REA consolidated its position as the top property portal by audience, building momentum to drive strong revenue growth. Higher investment in India is expected to see losses widen in this financial year.

UBS analysts said earnings were in line with its expectations due to slower than expected operating expenditure growth, which they said provided some confidence around REA’s ability to adjust costs should the macroeconomic environment deteriorate further.

Shares in REA – majority owned by News Corp, publisher of The Australian, closed down 4.3 per cent at $114.11.