REA Group plans to cash in on Athena Home Loans bounce and plans India expansion

Digital property powerhouse REA Group says it will never overpay, after its aborted takeover of Rightmove in the UK, and will now capitalise on its Athena investment and the India market.

REA Group expects price growth to cool as more homes come to market this spring. Picture: Getty Images

REA Group says more homes coming up for sale should moderate price growth this spring.

The digital property advertising business’s assessment comes as it plans to use an investment in non-bank lender Athena Home Loans to expand its reach into financial services.

The ASX-listed company says the Australian property market is experiencing its busiest spring selling season since 2015 as support from high employment, stable interest rates coupled with immigration levels help to drive buyer demand.

The company, which is majority owned by News Corp, publisher of The Australian, last week aborted a £5.6bn ($11bn) bid for British property portal Rightmove.

REA chairman Hamish McLennan told shareholders at its annual meeting on Wednesday that while the decision was disappointing, its approach was driven by a clear strategic rationale and the opportunity to create a global and diversified digital property company.

“We strongly believed that the proposed combination would have delivered significant shareholder value for both REA and Rightmove shareholders,” he said.

“While the outcome was disappointing, it was critical that REA maintains its longstanding, disciplined approach to capital management and mergers and acquisitions.

“We will not overpay and, in this case, the lack of engagement from the Rightmove board – despite the benefits of our offer – prevented us from having constructive discussions on price and making a firm offer.”

REA chairman Hamish McLennan. Picture: Jane Dempster

Mr McLennan said REA would focus on its strong growth pipeline underpinned by a clear strategy to extend in both its core business and adjacent markets.

“We are investing in the transformation of the core listings experience, and our recent investment in Athena Home Loans continues to build on the momentum in our financial services business,” he said.

“REA India also continues to represent an exciting long-term growth opportunity.”

The group has been on a mergers and acquisitions spree in the past 12 months, having acquired the remaining stake in property vendor and funding solutions business CampaignAgent, after initially taking a minority shareholding in 2021.

In June it acquired the remaining interest in end-to-end property sales platform Realtair and in the past month struck a deal to acquire a 19.9 per cent interest in non-bank lender Athena Home Loans.

The $62m deal, which is due to be completed by the end of 2024, underscores REA’s intent to push into property related sectors where it can offer services to home buyers coming through its realestate.com.au portal.

“This reinforces our commitment to providing homebuyers with greater choice and a seamless consumer experience when finding and financing property,” Mr McLennan said.

The investment will build on from the success of its Mortgage Choice Freedom products, which are higher margin and powered by Athena. It achieved $1.2bn in settlements as its digital offering achieved its first settlements in the June quarter.

New listings in Sydney and Melbourne were the highest for a September since 2015. In Brisbane it was the highest for the month of September since 2018 and in Canberra it was the highest for any September since 2004.

REA chief executive Owen Wilson said the company had observed national listings for the first quarter increase 7 per cent from the previous corresponding period because of positive seller sentiment and continued interest from buyers.

REA Group chief executive Owen Wilson.

“High listing volumes over the last year have predominantly been driven by the strength in the Sydney and Melbourne markets,” Mr Wilson said.

“This continued in the September quarter, with Sydney listings up 11 per cent year on year and Melbourne listings up 9 per cent.

“Smaller capital city markets have also shown strength with higher first-quarter listings in Brisbane, Adelaide and Perth. Despite the increase in the volume of stock available, properties are continuing to sell which indicates demand for housing remains robust.”

Citi analysts said the 7 per cent increase in listings in the September quarter was strong than the 5 per cent it had expected as it maintained a target price of $230 per share. Shares in REA were up 2.3 per cent to $216.93 in afternoon trade.

Mr Wilson said more stock on the market gave buyers more choice and should result in the moderation of house price growth.

The company plans to expand its reach into India this financial year after REA India delivered revenue growth of 31 per cent, driven by the core Housing.com company as it leveraged rapid growth in mobile penetration.

He said REA would beef up AI capabilities to offer greater personalisation for consumers and products for real estate agents to accelerate productivity and listings performance.