Real-estate portals Domain and REA Group have warned that surging inflation and rising interest rates have led to a slowdown in the residential property market, resulting in a decline in activity in the normally busy spring selling season.

At its annual general meeting on Wednesday, Domain told shareholders it expected earnings to fall this financial year with market conditions trending below expectations, particularly in inner-city areas.

“The rapid pace of interest rate increases has impacted on market sentiment and listing
volumes, with a noticeable deterioration since September, depressing the usual seasonal quarter two
uplift,” Domain chief executive Jason Pellegrino said.

The company said it now expected earnings (before interest, tax, depreciation, and amortisation) to fall slightly this year, triggering a 3 per cent fall in its share price in mid-morning trading to $3.10.

Meanwhile, shares in News Corp controlled REA Group were also lower by about 3 per cent after it said listings volumes were down 8 per cent in October, usually one of the strongest months.

Domain Group is majority controlled by Nine Entertainment Co, the owner this masthead.

Domain said at its annual results in August that costs would be in the range of $275 million to $280 million for fiscal 2023. These costs, which are now under review, will be skewed to the first half. The company said total revenue for the first quarter was up 23 per cent year-on-year and 13 per cent, excluding acquisitions.

Pellegrino said the company would focus on its marketplace strategy - which involves expanding services for clients, renters and buyers - as sentiment weakened.

“While we remain committed to longer-term margin expansion, as a result of the more
challenging market environment, we anticipate FY23 EBITDA margins will see a low single
digit percentage point reduction versus FY22 on an ongoing cost basis,” he said.