REA Group Delivers Strong Q3 Ahead of Anticipated Increase in Domestic Competition

The Australian real estate portal operator REA Group grew revenue by 12% year-on-year for the third quarter of its financial year. Highlights of the Melbourne-based company's performance for the three months ended March 31st include:

• Revenue of A$374M, up 12% compared to Q3 of FY24.
• Operating EBITDA (excluding associates) was up 12% at A$199M.
• Free cash flow was up 19% year-on-year at A$132M.

Despite the uncertainty of an upcoming federal election in the country, the Australian housing market continues to see robust demand and, as REA's CEO Owen Wilson mentioned in his comments in an accompanying press release, the company's Q3 results were also helped by an interest rate cut.

"REA delivered a strong third quarter result underpinned by double-digit yield growth as we continued to drive increased value for customers across our premium products. The first interest rate cut in 4 years, combined with expectations of more to come, spurred buyer demand and supported house price growth across the country. These conditions encouraged sellers to bring properties to market with listings matching the very strong levels of this time last year."

“The Australian property market continues to be supported by strength in the underlying fundamentals. Expectations of further rate cuts should support buyer demand, and this demand, coupled with steady house prices should underpin seller confidence. Our personalisation strategy is driving our record audience and as its rollout continues it will further underpin deep consumer engagement and the value we deliver to our customers and their vendors.”

REA's domestic performance (A$340M) was up 11% year-on-year on a like-for-like basis and was driven largely by a 15% increase in yield and a 10% average price rise for Premiere+, the top listing product for flagship portal Realestate.com.au.

While revenue from display advertising for new home developer clients was down for the quarter, the business was buoyed by a 13% upswing in project commencements. Commercial revenues were up thanks to an average 11% price rise and REA's Financial Sevices division also saw good performance driven by a 16% increase in settlements.

For now, Realestate.com.au benefits from a sizeable audience lead over its biggest rival, Domain. REA's report cited audience figures of 12.3 million Australians visiting the portal each month and claims that 6.4 million of those are exclusive users. While buyer enquiries were down 3% compared to Q3 FY24, the company noted that the number of properties tracked on its site reached 4.3 million during the quarter (up 24%) and the portal generated 50% more seller leads than it did a year ago.

In India, where REA operates Housing.com, PropTiger and Makaan through its subsidiary REA India, the company noted that increasing competition was "putting downward pressure on yields". Housing.com's core listings revenue was flat year-on-year but the segment benefitted from strong growth in adjacency services through its Housing Edge consumer offering and posted revenue growth figures of 28% overall.

While REA Group continues to trade at 52 times earnings, the company's share price did suffer a 4% dip in early trading as news reached the market that U.S. real estate giant CoStar had completed due diligence on an acquisition deal for Realestate.com.au's biggest competitor, Domain.

The looming presence of a deep-pocketed American rival was not commented on in REA's missive to the market but is likely to put pressure on the successor to Owen Wilson who, last year, announced plans to retire in 2025.