Domain and realestate.com.au are increasingly using targeted advertising on social media to try to counteract a fall in property buyers.
Analysts at Macquarie Bank have recalculated earnings at real estate classified businesses Domain, majority owned by Nine, and News Corp’s REA, which runs realestate.com.au.
The key reason is that the analysts see property listings slipping further than expected and dragging down earnings in the second half of the financial year.
The analysts now see a 10% fall in property listings for the six months to June, up from the previous assumption of a 6% drop.
“From our recent conversations with agents, we also see increased used of both social media/targeted advertising, as well as investment in direct communication via e-Brochures using databases provided by REA and in some cases DHG (Domain),” the analysts say.
Property analysts at CoreLogic data point to falls in property listings, down 15.2% in Melbourne and 22.9% in January, dropping again in February by 21.9% in Melbourne and 25.3% in Sydney.
“The combination of school holidays with the adjacency of Anzac Day and a late Easter, means that listing activity during April is likely to be very subdued,” the analysts write in a note to clients.
“This is affirmed by recent channel checks. May and beyond is still early to call.”
This chart shows the fall in listings:
Macquarie downgraded Domain to Underperform. “The key focus going forward will be execution in Victoria, its ability to leverage Nine’s broader platform, and volume trends going forward,” the analysts say.
The analysts see 2019 financial year earnings per share at REA fall by 2.0% and 4.9% for Domain, which has both digital and print revenue.
They have retained an Outperform recommendation for REA Group, a pure-play digital business. “The fundamental drivers of the business remain strong despite cyclical headwinds,” the analysts say.
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