The News Corp (ASX: NWS) press is reporting that the analysts at Citi Group have run the ruler over online real estate advertising business REA Group Limited (ASX: REA) and put an $80 share price target on it.
Notably, REA Group as the operator of the realestate.com.au property website is still two thirds owned by print, broadcast, and digital news giant News Corp itself.
According to News Corp reports the analysts at Citi believe that a softening property market will benefit REA Group as it could lead to more properties coming to market and them taking longer to sell. This is no big secret as property investors in particular tend to be synchronised to interest rate cycles in deciding when to sell their investments.
Just as share market investor investor psychology often leads share owners to head for the exits at the same time when prices start falling after a huge run-up, so does it apply to property investors.
Citi reportedly believes that the recently rapidly rising house prices have been a "headwind" for REA Group and domain.com as the property portal operated by Fairfax Media Limited (ASX: FXJ).
Historical property market data from service providers such as CoreLogic or Residex also shows that listing volumes in areas of Sydney over the past 12-24 months have been as little as half the volumes recorded in 2012 when cash rates were around 3.5%.
It's not rocket science that both REA Group and Fairfax will benefit from a lift in listings over the 12-36 months ahead and Citi's bullish $80 share price target may be on the money despite REA Group's outlandish valuation on conventional metrics.
