It’s a tough time to be in the real estate sector. With interest rates rising globally and fewer people being able to afford homes, demand is falling, as is overall revenue. For Aussie property tech giant REA Group (ASX: REA), this has meant dealing with declining listings and profits. As per its reports, national residential buy listings in October were down 18% YoY, with Sydney listings declining 31% and Melbourne down 29%.
Still, not all news is bad. For Q1 FY23, the Company reported a revenue increase of 16% to $305 million, even though its expenses increased by 22% to $131 million.
REA Group Chief Executive Officer, Owen Wilson, commented, “This result demonstrates the strength of our business and reflects the significant traction of our premium products as sellers increasingly seek to differentiate their properties. REA India further consolidated its position this quarter as the number one property portal in India by audience, continuing to build on its momentum to deliver strong revenue growth.”
REA reported a minor increase in listings. National listings increased 5% during the quarter, reflecting a number of state lockdowns in the prior period. Sydney listings were up 5% and Melbourne increased 12%. Owing to more pressure on household incomes and skyrocketing rent, people have less money overall to buy or rent a house. Australian rent revenue for REA was up YoY, with a 5% price rise and increased depth penetration partly offset by a 1% decline in rental listings.
Moreover, fewer projects took off in the previous year. The growth in commercial revenues, driven by higher depth penetration and a price rise on 1 July, was partly offset by lower developer revenues, which were impacted by lower project commencements during FY22.
Despite that, Wilson is optimistic about the Company’s e-commerce arm, realestate.com.au, as he states, “The value of realestate.com.au’s unparalleled audience is further enhanced when our consumers engage more deeply with the platform. During the quarter we saw continued strong growth in active members and property owner tracks, demonstrating the depth of interaction our audience has with our personalised experiences. This strong engagement underpins the high quality of the leads we generate for our customers.”
As for its international ventures, the Company’s India business, Housing.com, appears to be doing well. It delivered strong revenue growth of 47% for the quarter. As work from office returned, people started moving back to the main cities, thus driving an increase in demand. However, the country is also experiencing a real estate slow down due to rising prices. In the US, REA’s combined share of associates contributed a $5 million loss to core EBITDA, down from a $1 million gain in the prior period. This largely reflects lower contributions from Move Inc., its US acquisition. Move experienced a 6% decline in revenue arising from the challenging macroeconomic environment in the country.
Wilson concluded, “We’ve seen the heat come out of the property market in recent months and while positive underlying fundamentals remain, we expect this moderation to persist as interest rates rise. REA is well positioned in this environment, and we will continue to invest in the growth of our platforms and adjacent businesses to further increase the value we provide to our customers and consumers.”
Alinda is a Business Reporter for The Sentiment
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