What Real Estate Agencies Have To Go Through Amid Declining Housing Prices

  • Oct 23, 2018 AEDT
  • Team Kalkine
What Real Estate Agencies Have To Go Through Amid Declining Housing Prices

McGrath Limited (ASX: MEA) has witnessed impacts of the slump which has been witnessed by Australian housing markets. The company has witnessed an earnings loss amounting to $1.9 million in the September 2018 quarter because of the impacts which the company experienced because of the struggling housing market in Australia. However, it is expected that the housing market is expected to get even worse.

The real estate agents are witnessing tough times lately because of the subdued momentum in the sales rates. These agents have been encountering with increased stock levels. The top management of McGrath also reflected the concerns regarding the struggles which the real estate sector in Australia has been experiencing. They stated that subdued momentum was visible in the real estate markets and is evidenced by a decline in the residential property values. The management believes that currently, the tightened lending conditions have been negatively impacting the company’s transaction volumes. However, they are confident that this environment has a potential to further stabilize the property markets in Australia. 

McGrath witnessed the negative impacts mainly because the buying activity has resulted in the decline thereby boosting the stock levels. As a result, a longer time duration to sell the homes, as well as falling prices throughout the sector, impacted the results.

Amidst the negative momentum in the property markets, the management of McGrath stated positive views in regard to the new listings. They added that the positive momentum which was visible in the new listings reflects the company’s brand awareness and strength, its capability to retain as well as attract the best talent and the commitment of the company’s agents in regard to the customer service. However, in some of the aspects, the company has managed to outperform the broader markets. In terms of listing new dwellings for sale, the company has witnessed positive momentum when compared with average. This momentum was witnessed in the capital cities of Brisbane as well as Sydney.

However, moving forward, it is expected that the results of McGrath are expected to witness the favorable impacts in December quarter. McGrath ended the day on a weaker note. Its stock price stood at A$0.325 per share which implies the decline of A$0.010 per share or 2.985% intraday. Its annual dividend yield stood at 2.99% and its market capitalization amounted to $56.26 million. However, the company’s stock price is currently trading in the lower range.

The stock performance of McGrath Limited has not been impressive over the past few months. The company’s stock price has witnessed the fall of 16.25% in the previous 6 months.

What other factors could impact the Australian economy?

The Australian economy might witness the interim report impacts on the banking sector by making the stricter rules and regulations with respect to corporate and retail lending. However, imposing the strict rules would also impact the broader Australian economy as lower retail and business lending would, in turn, lead to a fall in the consumer spending as well as corporate deployments towards growth projects.

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