REA Group market dominance delivers pricing power within a quality franchise

About REA Group Limited

REA Group Limited (REA, the Group, ASX: REA) provides digital tools, information and data on websites and mobile apps for people interested in property. REA assists real estate agents, developers, property-related businesses, and advertisers to promote their services. REA has two operating segments, being Property & Online Advertising; and Financial Services. Property & Online Advertising services the real estate industry while the Financial Services segment derives its revenue through commissions earned from mortgage broking and home financing solutions offered to consumers.

11.2 million people visited realestate.com.au each month in March quarter 

REA Group continues to go from strength to strength driven by a strong and resilient Australian property market. Revenue is up 20 percent to $1,060 million and operating EBITDA is 24 percent higher at $616 million for the 9 months to March 2024, compared to the same period in 2023.

However, it is the audience numbers that highlight the market penetration of REA’s digital tools and website. 11.2 million people visited realestate.com.au for 130 million visits each month on average in the March 2024 quarter. Average monthly enquiries numbered 2.4 million, and 3.5 million unique properties were tracked by their owner each month.

This market dominance provides REA with considerable pricing power. This is evidenced by an average 13 percent National Listings price rise and an average 8 percent National Rental Listing price rise in the March quarter. This increase offset the decline in Rental Listings that were down by 5 percent in the quarter, reflecting the tight rental market in Australia.

Commercial and Developer revenue increased during the quarter, aided by an 11 percent price rise while Developer Display contributed to higher Media revenues. Financial Services revenue grew modestly with a 2 percent decline in loan settlements. The broker network increased by 1 percent year-on-year to 1,058 at the end of March.

Low unemployment and high levels of immigration driving real estate demand

Healthy buyer demand and seller confidence is driving real estate activity and new listings  in a strong market. National residential buy listings are up 6 percent on the previous corresponding March quarter. The strength is coming from the Sydney and Melbourne market listings which are up 20 percent and 18 percent respectively for the March 2024 quarter.

Supply is benefiting from property prices rising to record levels and increased investor selling in some markets. Demand is being supported by strong fundamentals including low unemployment and high levels of immigration.

Leveraging the power of their brand 

REA holds market dominance and operates the top-ranked real estate classifieds website in the Australian market and is the top-ranked site across various Asian markets, following the iProperty Group acquisition. It delivers the largest audience to agents and vendors looking to advertise property to prospective buyers and it provides buyers and renters with the largest number of prospective properties. This market dominance provides the Group with a powerful brand, and it leverages that brand power with regular price increases and value-add features that attract selling agents as they execute their marketing efforts.

This pricing power reflects the early first mover advantage that has enabled the Group to build a quality franchise with revenue growth sourced through service price increases and increased listing volumes.

While there may be periods of listing volume volatility, REA’s market dominance and pricing power, and being 61 percent owned by NewsCorp, should underwrite consistent earnings growth over the long-term.