Property market declines begin to affect REA Group

REA Group has seen their volume listings in January hit the breaks, and it seems to be a sign regarding a potentially decadent property market at large.

- Re-listing revenue returning as a growth driver
- Upcoming elections a likely damper
- More subdued price rises likely into FY20

A slowing property market with fewer listings is expected to catch up with REA Group in the second half, after first half results that were comfortably ahead of broker expectations.

Listing volumes were weak, nonetheless, in the first half, declining -3% overall. Sydney was down -10% while Melbourne was down just -1%. More recently, listing volumes were down -11% in January, with a -19% fall in Sydney and -13% in Melbourne.

The company has maintained its target for revenue growth to exceed costs growth in FY19, although higher marketing costs are expected to mean this will not happen in the third quarter.

While management predicted lower second half revenue and profit growth, it remains reasonably upbeat. Re-listing revenue, which had been absent, is now returning as properties take longer to sell. Several brokers point out this is the first time the company has called this out as a notable driver of revenue.

Listing volumes in January were very weak and, while January has not been a good guide historically, management is cautious. Moreover, brokers note the upcoming NSW and federal elections could cause a damper on listings through March to May.

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