REA turns $372m profit, says housing recovery to come as rates stabilise

Online listing company REA Group said it expects housing markets to pick up as interest rates stabilise and demand is spurred by rising immigration.

Online listing company REA Group said it expects housing markets to pick up as interest rates stabilise and demand is spurred by rising immigration, as it turned in a $372m profit.

The company cautioned that for now seller confidence is still being hit by uncertainty about rates and a lack of supply of new stock to both buy and rent.

But it said that demand remains strong, with Australia’s residential property market recording healthy auction clearance rates and property prices returning to growth in 2023. It also called out the positive impact of low unemployment and higher wages growth on fuelling housing demand.

Last month, new listings of homes for sale slipped by 5 per cent nationally year-on-year but Sydney and Melbourne have rebounded with listings both jumping by 9 per cent, and stronger trends are expected in the next quarter, with REA’s higher yielding products also gaining a larger foothold.

REA chief executive Owen Wilson said the fundamentals of the Australian property market remain healthy.

“We are continuing to see strong demand and a return to price growth, and this is converting to a more attractive market for sellers. We believe stabilisation of interest rates is within sight and expect this will lead to an increase in market activity,” he said.

Mr Wilson said that the market was running at more normalised levels, with Melbourne and Sydney poised to lead a recovery, with those two markets also where product prices and penetration of premium products are strongest.

“In this environment, REA Group is well positioned for growth,” he said.

REA’s revenue bumped up by 1 per cent to $1.18bn and earnings before interest, taxes, depreciation and amortisation, excluding associates, dipped 3 per cent to $651m. The net profit of $372m was down 9 per cent, and earnings per share was off by the same amount to $2.82, reflecting the tough market.

REA chief executive Owen Wilson. Picture: John Feder

Revenue growth was underpinned by the strong performance of the growing REA India business, with a 46 per cent jump, while local revenue dipped 1 per cent with yield growth across advertising products being offset by the challenging market and very strong prior year comparatives.

Mr Wilson said the year-on-year performance reflects the comparatively very strong environment in 2022.

“Despite the significantly lower listings in fiscal 2023, REA’s result demonstrates the strength and resilience of our business as customers continued to prioritise our premium products, leading platforms, and superior audience,” he said.

He added that the Indian business was delivering exceptional revenue growth and had extended its leadership position as the top property portal by audience.

REA operates realestate.com.au and realcommercial.com.au, data business PropTrack, and mortgage broker Mortgage Choice. Core Australian revenue of $1.1bn was down 1 per cent year-on-year.

Residential revenue also dipped 1 per cent to $805m as the company faced a 12 per cent fall in national listings, which it partly offset with the greater penetration of higher yielding products. There were larger listings declines in the higher yielding Melbourne and Sydney markets.

Rent revenue increased as product prices rose but there was a small decline in listings due to a continuing lack of supply. Commercial and developer revenue bumped up 4 per cent to $142m but was hampered by the fall-off in new projects kicking off.

REA said the developer market remains challenged, impacted by rising input costs and labour shortages resulting in developers being less willing to take new projects to market.

REA shares closed 12c higher at $158.74.

E&P Capital analyst Entcho Raykovski said the earnings were broadly in line with market estimates and the outlook is also consistent with prior comments from management.