Bullish take on property market
THE fundamentals of the residential property market remain positive, with an increasingly healthy balance between supply of properties and demand from buyers, online property classified company REA Group said after turning in healthy quarterly results.
While further interest rate rises are expected, the company said strong bank liquidity, record low unemployment and increased immigration was underpinning the Australian property market.
In April, national residential listings fell 8 per cent yearon-year, with Sydney listings declining 19 per cent and Melbourne 18 per cent, but this was affected by the timing of the Easter and Anzac Day holiday period and not as bad as predicted.
REA said national listings were likely to be down yearon-year in this quarter, reflecting very strong listings last year and potential impacts from the federal election, but the impact was not expected to be permanent.
REA chief executive Owen Wilson said the March quarter had been driven by a healthy property market with listings up by 11 per cent. The financial services unit also had a strong quarter, as did its data business with its Indian business also recovering
The property listings boss was dismissive of “doom and gloom” commentary on the residential market, saying that people were transacting while knowing that rates were rising. “If you look at the projected rate increases, they really only get us back to where we were pre the pandemic,” he said.
He endorsed major bank comments that the majority of borrowers were sitting on healthy cash balances in mortgage offset accounts and were well insulated. “For the last few years banks have been using 5 per cent interest rates for their serviceability calculations,” he said.
Mr Wilson said May listings had been expected to be well down in the lead-up to an election but were not.
REA’S expanding financial services settlements growth is likely to slow in the fourth quarter as the company cycles through exceptional growth last year. It also expects the current industry trend of increased mortgage run-off rates to negatively affect the valuation of future trail commissions at year end.
Developer project starts are expected to be down relative to last year, when the market was boosted by home builders, and rising construction costs could also hinder some projects.
But REA believes that volume headwinds in the next quarter will be more than offset by higher residential and commercial yields.
That is supported by contracted price rises and increased penetration of its products, some March volumes spilling over as well as growth in the data and India businesses. Low-double digit operating cost growth is expected.
Core operations generated revenue of $869m and EBITDA including associates was $523m for the nine months to the end of March.
This was 23 per cent yearon-year revenue growth, driven by the Australian residential business and the inclusion of Mortgage Choice, and EBITDA including associates was up 27 per cent.