REA Group profits rise 25% as low unemployment and pandemic savings keep property buyers interested

Despite property prices being in a state of volatility amid rising interest rates, that hasn’t halted real estate tech company REA Group (ASX: REA) which reported 26% revenue growth to $1,170 million for FY22 and $408m net profit, a 25% increase. 

REA largely credits the acquisitions of REA India and Mortgage Choice for their revenue growth as the Company progresses their operation beyond just their flagship realestate.com.au website which is home to Australia’s highest number of property listings. 

Besides the positive impact of these acquisitions, revenue growth was also bolstered by strong growth in Australian Residential revenues, up 24%. Core operating costs increased 34%, largely driven by the Mortgage Choice and REA India acquisitions. Excluding acquisitions, core operating costs increased by 11%, reflecting investment to deliver our strategic initiatives, a tight labour market driving higher remuneration costs, an increase in revenue-related variable costs, and investment in brand and marketing.   

REA Group CEO Owen Wilson, commented, “Key milestones were also achieved in our property data, financial services and Indian businesses, building strong momentum. These markets present great opportunities and the revenue contribution of these businesses is growing rapidly.”

That the digital real estate market is a competitive one is not lost on REA. The Company witnessed 3.36x more visits than the nearest competitor each month on average on its digital real estate arm, realestate.com.au. The FY22 results revealed that 62% of Australia’s adult population—12.7 million people—visited the site each month on average. 

The site hit a new a record of 145.5 million visits in October 2021. Despite rising interest rates, there has been an 11% YoY increase in buyer enquiries. Plus, there has been a 25% increase in active members, and a 51% YoY increase in active property owner tracks.

Besides that, REA Group has a 20% investment in Move, Inc. (Move) which operates a property portal in North America, realtor.com. Move revenue increased 11% for the year, driven by both traditional lead generation and referral model growth. At the same time, Move witnessed higher employee and marketing costs as the business continued to reinvest to drive and expand their core businesses. This resulted in a $2 million decline in Move’s equity. 

Overall, REA Group witnessed an increase in real estate listings on their platforms. In July, National residential new listings were up 7% YoY, with Sydney listings increasing 18% and Melbourne up 6%. YoY growth rates in the first quarter will reflect the Sydney and Melbourne lockdowns in the prior period. Growth rates beyond that will reflect the strong prior period listings volumes. 

Leveraging their assets, REA’s Media and Data division increased its revenue by 9% to $97m, benefiting from new contracts and increased automated valuation model (AVM) volumes. 

The Australian residential property market is likely to continue to moderate as interest rates rise. While property prices have been increasing because of that, low unemployment levels, high savings and increasing migration will continue to support demand.