Softer Property Market Sinks McGrath

A weak interim profit lies ahead for struggling real estate agency McGrath which yesterday reported a small loss for the first quarter of 2018-19 and all but admitted the company will not make a profit for the year to June 30 on an after-tax basis.

McGrath surprised with a lengthy announcement detailing the impact of the slide in house prices and listings in Brisbane, Sydney, and Melbourne in the September quarter.

The upshot was a $1.9 million loss for the September quarter. The company warned of a materially smaller loss in the December quarter and said it expected the second half of fiscal 2019 to be stronger than the first.

McGrath said auction clearance rates and the number of properties taken to auction were well below the previous year. An increase in stock levels combined with lower buyer activity meant houses were taking longer to sell and prices were down across the sector.

It said that in the 12 months to September 30, the number of settled sales in the broader Sydney, Melbourne, and Brisbane markets were down 18.5%, 15.8% and 11% respectively.

However, it said its franchise network in NSW and Queensland and it’s Sydney and Brisbane company-owned offices outperformed the market in terms of new listings in the quarter.

“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,” chief executive Geoff Lucas said in a statement.

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

In 2017-18 McGrath lost a net $63 million after write-downs and impairments and earnings before interest tax depreciation and amortization of $1 million and claimed its most difficult days were behind it.

Not quite yet! McGrath shares fell 3% to 32.5 cents. Investors reckon it is not out of the woods.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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