Domain chief executive Jason Pellegrino has predicted that the property market boom that erupted during COVID-19 still has a long way to go, and dismissed investor qualms about growth in the real estate portal’s cost base.
Shares in Domain slid more than 6 per cent to $4.77 on Thursday after it reported a 2.4 rise in net profit to $19.5 million and earnings before interest, tax, depreciation and amortisation growth of 14.2 per cent to $61 million in first fiscal half. The company said it will pay a fully-franked interim dividend of 2 cents per share.
Mr Pellegrino said despite the surge in nationwide property prices during COVID-19 listing volumes actually fell below typical levels, which could bode well for the company as the next phase of the real estate market unfolds.
“An average market looks like about 580,000 listings a year…so it’s high. In COVID-19, we were down in the 400,000s. Those 600,000 plus listings are going really, really quickly because the demand is still there.”
Most major banks have predicted slowing growth in real estate prices this year, as the Reserve Bank winds back stimulus measures and begins to consider raising interest rates.
Mr Pellegrino said job security, flexibility working and a greater need for space as people rethink their lives was driving strength in property, as well as people selling who were waiting for the economy to recover.
Mr Pellegrino said he was surprised by the large share price fall on Thursday, but said he did not think it was due to guidance costs would increase in the “low-teens range” from a current base of $194.4 million.
“We’ve been very explicit about the cost growth. A big portion of that relates to higher revenue, and the production and distribution. It’s good cost growth. There is some confusion in the market and particularly the analyst services around year-on-year costs. This is an incredibly strong set of results.”
“You’ve got this double whammy of going through,” he said. “We see quite a strong listings environment maintaining for quite a while and interestingly, the buyer side, that demand side is actually still strong.” He said he did not expect the federal election to have an impact on the market, in the same way as it did in 2019.
“That election just had some really meaty property policy aspects,” he said. “This is not an election cycle with an abundance of policy decisions that will be taken to that election.”
Jarden Group analyst Elise Kennedy said the result was strong. “We continue to see the outlook for the next 12-18 months as solid for listings/sales but from 2023 it will likely be a bit tougher, putting more weight on the likes of PropTech to drive earnings, a note said.
Domain is majority owned by Nine Entertainment Co. Nine also owns this masthead.
Article Source: www.brisbanetimes.com.au
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