The REA Group share price hits a record high on surging auction rates and listings

Is REA Group Limited (ASX: REA) a buy?

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The REA Group Limited (ASX: REA) share price hit a record high of $110.48 this morning and is now up around 47% over a calendar year 2019 that has seen a strong rebound in property prices.

According to realestate.com.au auction clearance rates sat at 80% in Victoria and 77% in NSW for the week to September 22 2019.

Generally auction clearance rates above 70% suggest rising house prices as buyers are more than meeting sellers' expectations. Auction clearance rates have been consistently above 70% in the major markets of Sydney and Melbourne for a couple of months now.

In part the auction clearance rates have been higher due to a lack of stock on the market, which is obviously a negative for REA Group as it means fewer listings.

However, according to news reports nearly 2,000 homes were listed for auction this weekend which is a substantial uplift on prior weekends as the Spring selling season moves up a gear. 

Mortgage lending also soared over July 2019 according to the latest ABS data, with total new lending commitments to households up 3.9% on the back of lower rates and the banking regulator APRA scrapping serviceability rules.

Moreover, cash rate futures traders are now putting an 82% chance on the RBA cutting rates 25 basis points to 0.75% on October 1. 

We can see then that nearly all the data and fundamentals point to stronger property markets and listings over the next 12 months, which is good for REA Group and its rival Domain Holdings Australia Ltd (ASX: DHG).

While the big banks like Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX: NAB) also increase revenues via more lending. However, whether the credit growth is enough to offset falling net interest margins is yet to be seen. 

Motley Fool contributor Tom Richardson owns shares of REA Group Limited.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares of National Australia Bank Limited. The Motley Fool Australia has recommended REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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