By Sam Buckingham-Jones
Billions have been wiped off the valuation of REA Group by stockbrokers who have lowered their share price targets for the real estate listings giant as a direct result of tax changes in the recent federal budget, which they predict will lead to a slide in properties coming to market.
The price of homes in Sydney and Melbourne are already falling and those cities’ auction clearance rates have plunged to their lowest levels in almost a decade, after last month’s budget targeted property investors with proposed changes to capital gains and negative gearing.
A victim of these planned policy changes has been REA, the $18 billion property group majority owned by News Corp. REA owns realestate.com.au and makes money from almost every property coming to market.
Treasurer Jim Chalmers proposed a minimum 30 per cent tax on capital gains from July 2027 and to abolish negative gearing for existing properties, which are the most significant changes in a generation and designed to help first home buyers get into the market.
Macquarie analyst David Fabris has forecast the number of property listings would drop 1 per cent in the 2027 financial year, 4 per cent in 2028 and a further 1 per cent in 2029. There could be an initial rush as some investors sell out. He slashed his target price from $190 a share to $155. REA’s shares were recently trading at $133.7.
“Australia is facing a fourth period of housing market reform in 40 years; with the 2026 budget, coupled with a challenging backdrop, we see this negatively impacting listing volumes and house prices medium-term,” Fabris said in a note.
“The fear-of-missing-out looks to have faded; while demand remains, there is no longer urgency, with buyers happy to wait for the right opportunities and with investors pulling away following the 2026 budget.”
Earlier this month, UBS went even further, slashing 22 per cent off its target price and putting REA at $165. It factored in a “likely scenario” of volumes declining 10 per cent cumulatively over the next two years.
“We now expect listing volumes to decline over the medium term as selling activity stalls as investors and home owners retreat as they wait to see how market plays out post property tax changes,” UBS analyst Lucy Huang wrote to clients.
In an update release after the May budget, REA forecast a short-term bump in listing turnover that would be offset by fewer sales as some investors would want to hold on to their properties.
Turnover would be “broadly unchanged” in the medium term, REA’s senior economist Angus Moore wrote.
Shaun Weick, a deputy portfolio manager at Wilson Asset Management – a shareholder in REA – said it was a “double whammy” for real estate classifieds companies.
Artificial intelligence disruption fears had helped wipe 41 per cent of REA’s valuation over the past year, along with other firms such as Seek, which was down 46 per cent and CAR Group, which has fallen by one-quarter.
Economists mostly believe the Reserve Bank of Australia has finished hiking interest rates, a position that would, normally, mean more buyers returning to the property market.
“In a rate topping cycle, you wouldn’t expect to be seeing the property market as weak as it is – 40 per cent clearance rates are plumbing COVID-era lows,” Weick said.
“That tells you one thing, that the potential policy changes are having a significant impact on sentiment. There’s no question it’s having real-world consequences.
“What’s the knock-on effect? Reduced housing turnover, falling prices and negative wealth effects which pressures consumer sentiment and spending. Overlay this with perceived AI risk, and you can see why the shares have been under pressure.”
News Corp, the global media empire that owns The Australian, The Daily Telegraph and The Courier Mail locally, has been an ardent critic of the federal government’s tax changes. Its mastheads have splashed with headlines like “Your Capital His Gain”, describing Chalmers’ budget as a “big-taxing communist manifesto” emblazoned with a hammer and sickle.
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