The Australian real estate classified market is dominated by two first movers in the area which were originally built off the backs of the classified business of major newspaper mastheads, News Corp and Fairfax.
The market leader in the sector as of today is realestate.com.au (ASX REA) and Domain.com.au (ASX DHG), recently spun off from Fairfax is the second largest online real estate classified website covering the Australian market. Although both companies are listed News Corp and Nine Entertainment (current iteration of Fairfax) still retain a large interest in the business.
Even though Domain.com.au is one of the highest internet traffic volume sites in Australia but the primary customer for the website is real estate vendors/agent.
Market position is crucial in the classifieds business where being number 1 provides a disproportionate share of real estate listings as there is always a tendency for sellers to flock to the website with the highest traffic. This is seen in general classifieds business such as eBay and to an extent broader eCommerce platforms such as Amazon.com.
The good news for domain.com.au is that the winner takes all mentality has not transitioned into the real estate classified market. There is still value being number 2.
Vendors and agents typically lists their houses on both sites to capture the full extent of the buyer pool but there is always a segment of the market with a limited budget will just pick one and they usually end up on the highest trafficked classified site.
REA vs DHG share price
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The share price performance of the real estate classifieds business shows they were great shares to own over the last year.
Both companies has a relatively low dividend yield as result of the low payout ratios as both are still retaining cashflow to fund its growth strategy.
DHG Growth Story
Growth for DHG going forward will be driven by two main trends. Firstly as it always played catch up to REA, the low hanging fruit is to take market share from REA. The recent annual results show they are making headway in this space.
DHG share price shows that it has been performing well but it has lagged REA even though it has benefited from increasing interest from investors in the space given its duopoly structure.
Secondly, the business is exposed to the market performance of the Australian housing market especially the capital city markets such as Sydney and Melbourne property markets make up the largest portion of the business.
So far the market has been resilient but then again the real test will come once the government stimulus wears off.
DHG Dividend History
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