SYDNEY - REA Group, the real-estate classifieds provider, announced a 22% growth in its first-half core profit, fueled by the increase in Australian residential property listings. The ASX-listed company reported a net profit from core operations of AUD 249.7 million for the six months ending in December, compared to AUD 204.9 million in the previous year.

Despite a 37% decrease in net profit on a statutory basis, primarily due to a AUD 120 million impairment against its stake in PropertyGuru, revenue rose by 18% to AUD 725.5 million. In light of these results, REA increased its interim dividend to AUD 0.87 from AUD 0.75, demonstrating its confidence in future growth.

The average analyst forecast predicted a core net profit of AUD 254 million with revenue reaching AUD 721 million. However, REA's strong performance surpassed these expectations.

One of the key drivers of success was the increase in new residential sale listings at REA's core Australian operation, which saw a 4% year-on-year growth. Notably, Sydney and Melbourne experienced substantial listing volumes with increases of 19% and 18%, respectively. These significant jumps can be attributed to the rising property prices that have enticed sellers back into the market.

Overall, REA Group's strong financial results exemplify its position as a leading player in the Australian real estate industry. With the increasing number of residential property listings and growing revenue, the company is well-positioned for future growth and success.

Buy Yield Rose 19% on Year, Amidst Favorable Market Factors

The buy yield of REA, a prominent company in the property market, experienced a significant boost of 19% compared to the previous year. This substantial growth can be attributed to various factors, including the overall rise in property prices and the increased utilization of its premier product. However, REA anticipates a decline in yield during the second half of the fiscal year due to a slowdown in Sydney and Melbourne listings.

Australian Residential Property Values Ascend by 8.1%

According to data provided by property analytics firm CoreLogic, the average value of residential properties in Australia recorded a noteworthy surge of 8.1% over the span of 12 months, concluding in December. This performance effectively reversed the 5.3% decline observed in 2022. The soaring property values have consequently created a favorable environment for individuals seeking to sell their properties for financial gains. Conversely, these conditions have made it more challenging for potential buyers.

Higher Interest Rates Pose Challenges for Prospective Buyers

Prospective buyers have encountered increased difficulty due to higher interest rates, which have resulted in elevated borrowing costs. As a consequence, many individuals are finding it increasingly difficult to meet lenders' affordability criteria.

The Reserve Bank of Australia Implements Measures to Control Inflation

The Reserve Bank of Australia responded to inflation concerns by raising the country's cash rate on multiple occasions throughout 2023. The intention behind these actions was to mitigate inflationary pressures. As of now, the cash rate stands at 4.35%, a significant increase from 0.1% in May 2022. Additionally, the central bank has indicated the potential for future rate cuts later this year, which could positively impact property turnover by boosting market activity.

Projected Operating Costs for REA and Ownership Structure

In the first half of the fiscal year, REA witnessed a year-on-year increase in operating costs by 11%. Looking ahead, it is expected that these costs will continue to grow by a percentage within the mid-to-high teens range for the entirety of the 2024 fiscal year, as stated by REA.

It is worth noting that News Corp holds a significant 61% ownership stake in REA. News Corp also owns Dow Jones & Co., which is the publisher of this newswire and The Wall Street Journal.