REA Group: Property tax reforms to weigh on listings. Downgrade to Neutral

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REA Group: Property tax reforms to weigh on listings. Downgrade to Neutral

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REA Group

Property tax reforms to weigh on listings.

Downgrade to Neutral

Rating Change: NEUTRAL | PO: 175.00 AUD | Price: 158.81 AUD

Property tax reset to pressure listings. Down to Neutral 09 June 2026

We downgrade REA to Neutral (from Buy) with new PO to $175 (was $210) as the new Equity

property tax reforms are likely to weaken housing turnover and listings. The removal of

negative gearing on established homes investments and CGT changes would extend

Key Changesholding periods for investors and owner-occupiers, pressuring REA’s volumes in FY27.

Syd & Melb - where listings are 7-8% above averages - are likely to lead the volume (A$) Previous Current

decline, resulting in pressure on both REA’s volume and avg ad yields. Our FY27 earnings Inv. Opinion B-1-7 B-2-7

are 5% below the Street. While valuations are near trough levels, we see them as fair Inv. Rating BUY NEUTRAL

with limited re-rating potential amid housing weakness and ongoing AI-related concerns. Price Obj. 210.00 175.00

We model 3% decline in listings volumes in FY27 2026E2027E EPSEPS 4.905.67 4.885.38

We forecast REA’s listings to decline 3% in FY27 (vs. Street assuming flat), driven by 2028E EPS 6.48 6.15

both structural and cyclical headwinds. Housing turnover is likely to weaken as: (1) the

new tax reforms disincentivize downsizing, as the primary residence is now the only Sriharsh Singh >>

major tax-advantaged asset; (2) a softer housing market would prompt households to Research Analyst

Merrill Lynch (Australia)

delay upgrades; and (3) the grandfathering of negative gearing on existing investment +61 2 9226 5308

properties creates a strong lock-in effect, suppressing portfolio churn.