February 7, 2019 / 10:38 PM / 7 months ago

UPDATE 2-Australian real-estate ad site REA warns of a slowdown, sector shares drop

* REA half-year profit drops 98 pct owing to Asia impairment

* REA forecasts slower revenue growth, tough market conditions

* Shares hit three-week low, rival Domain shares also slump (Adds market reaction, plus agent, analyst and management quotes)

By Tom Westbrook

SYDNEY, Feb 8 (Reuters) - Australian real estate classifieds firm REA Group Ltd on Friday reported plunging listings, slowing revenue growth and forecast no near-term improvement as a prolonged property boom ends and falling prices put the brakes on advertising.

Tighter lending, higher taxes on foreigners and an apartment glut have driven the steepest price drops in a generation in Australia and pushed REA listings lower, especially in Sydney where they have fallen off a cliff.

REA was able to stem some of the damage by lifting prices, but expects rising costs to overtake revenue growth in coming months, joining construction firms, building suppliers and retailers in reporting the effects of the sharp slowdown.

The company, majority-owned by News Corp, also booked a A$173.2 million ($122 million) impairment charge on its Asian business, forecasting lower near-term growth, wiping out its profit for the six months to Dec. 31 almost completely.

“Definitely what we’re paying out to the advertisers has dropped,” said Peter Wong, a real estate agent in Sydney’s Chinatown, as sales have slowed and ad prices climbed. “People are starting to look to social media instead.”

REA shares fell as much as 5.5 percent to their lowest in three weeks as the broader market dropped 0.5 percent. The gloom, especially on Sydney listings, knocked rival Domain Holdings Australia Ltd down 4.3 percent to a record low. “The fact that the property market’s been slowing is just a weight on listing numbers generally - it doesn’t look like that’s set to change anytime soon,” Steven Daghlian, analyst at Commonwealth Securities, said of the price moves.

REA’s net profit came in at A$2.3 million for the six months ended Dec. 31, compared with A$132.4 million reported a year earlier. Listings fell 3 percent nationwide and 10 percent in Sydney, with a drop of 19 percent recorded in January, outside the reporting period.

Higher prices lifted revenue 15 percent to A$469.2 million, though the company said that would slow in the current half.

“The market conditions during the half have created headwinds,” REA Group Executive Finance Manager Graham Curtin told analysts on a conference call.

National and state elections due by May and a slowdown in construction would likely push listings even lower in coming months, he added. “These factors are expected to result in a lower rate of revenue growth in the second half.”

Besides REA, Australia’s property downturn has driven earnings downgrades at building suppliers Boral Ltd, builder AV Jennings Ltd and even slowed revenue growth for furniture-seller Nick Scali Ltd. ($1 = 1.4156 Australian dollars)

Reporting by Tom Westbrook; Additional reporting by Rashmi Ashok and Shriya Ramakrishnan in BENGALURU; Editing by Peter Cooney and Christopher Cushing

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