McGrath says sluggish property market to blame for earnings woes

A slowing property market and dwindling auction numbers have put pressure on McGrath (ASX: MEA) during the first quarter.

The real estate giant says auction clearance rates and the number of properties taken to auction are at levels "well below the previous year".

Meanwhile, there has been an increase in stock on the market with lower buyer activity, resulting in price reductions and homes taking longer to sell.

McGrath's 1Q19 earnings result (EBITDA) has suffered due to these factors, coupled with Sydney, Melbourne and Brisbane property sale numbers falling by 18.5 per cent, 15.8 per cent and 11 per cent respectively across the market.

Despite McGrath's agent and listing numbers both growing quarter-on-quarter over the past nine months, "softening market conditions" contributed to an unaudited EBITDA loss of $1.9 million for the first quarter.

However CEO Geoff Lucas is optimistic that McGrath's new listings will outperform the market standard.

"Over the financial year to date, we have seen a noticeable slowdown in the market with a correction of residential property values experienced across the entire real estate sector," says Lucas.

"In addition, the tightened lending environment is impacting current transaction volumes, however we believe this will ultimately strengthen the stability of our property market.

"While McGrath has also been affected by this downturn, we are encouraged by our number of new listings performing better than the market."

Historically, the first quarter is generally a slow burner for McGrath when compared to the second.

The company's AGM is scheduled for 23 November, when it will provide a clearer snapshot of the half to investors.

MEA shares dipped by 4.5 per cent during early trade (10:06am AEST) at $0.32.

Business News Australia