REA Group Confident of Property Market Turnaround
The growing probability of Australia experiencing its first recession in nearly three decades could prohibit Australia’s property market from regaining traction. Along with a massive slash in interest rates and government stimulus, the coronavirus outbreak could further threaten to weigh heavily on one of the key sectors within the economy. While the number of Chinese buyers in the local property market has reduced drastically, the brunt of the impact may yet to be felt. Rather, the recent coronavirus-induced sell-off on the share market could deter investors’ appetite.
This is because people may consider putting off buying property along with other activities for fear of contracting the virus. Yet, REA Group chief executive Owen Wilson is confident of Australia’s real estate sector, led by Sydney and Melbourne markets. This is in part attributed to financial institutions making it easier to access credit. Despite current macroeconomic conditions, REA Group Limited is poised to achieve its goals as Sydney properties are now spending less time on the market. As of March, data revealed that buyers were eager to pick up properties ahead of further potential price hikes while taking advantage of current record-low interest rates.
However, the company failed to produce decent results in the six months ending 31 December. Net profit fell 13 per cent to arrive at $152 million, while revenue dipped 6 per cent to $440.3 million. More notably, key factors that resulted in the performance were the steady decline in Australian residential property listing, which plummeted 14 per cent nationwide.
Specifically, Sydney listings witnessed a 17 per cent fall while Melbourne followed closely behind, retreating 16 per cent relative to the year before. On the back of these results, Mr Wilson revealed that the results were evidence of REA’s resilience as the local property market experienced one of the toughest periods of the past 30 years where the business emphasised on costs and selling premium products.
On a positive note, the group’s business in Asia delivered a 5 per cent increase in revenue. This boiled down to the strong revenue growth in Malaysia, supported both by increased consumer audience and acquisitions. Yet, the results within the region may not pass off as too much of a surprise. Back in November 2019, REA Group has established a joint venture with digital property marketplace 99.co, a digital property platform headquartered in Singapore.
The initiative aims to bring together the largest customer and listings footprint in Indonesia and Singapore. Even as REA dominates the Australia market, the new Asian venture is poised to be the disrupter. Mr Wilson believes that the Singapore marketplace has now arrived at a stage of maturity where it could handle disruption. Thus, REA hopes to boost the new venture by capitalising on its successful local products and strategies which could potentially be applied to Southeast Asia.
By Caroline Wong
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