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McGrath share price tanks as it warns Sydney’s house prices are still falling

Australian House Prices

The McGrath Ltd (ASX: MEA) share price hit a record low of 23 cents yesterday after the Sydney-focused real estate agency warned late on Friday that its full year EBITDA will balloon higher than previously forecast.

The CEO warned that for the eight months to 28 February 2019 the group made a $4.5 million EBITDA loss, with trading conditions in March 2019 also “below expectations”.

McGrath also warned transaction volumes remain 20% below the prior year in both Sydney and Melbourne with Sydney home values down 10.4% on the prior year.

The group blamed the poor result on the federal and state elections creating uncertainties in NSW, alongside sellers failing to adjust the reality of the market in their price expectations.

Worryingly for McGrath and property bulls generally is the reality that the Reserve Bank now has little room to ease lending rates, with its cash rate already sitting at a historic low of 1.5%.

On the bright side the CEO did flag that McGrath’s rentals business continues to perform well, while its balance sheet is in reasonable shape with no debt and $14.3 million in cash.

Elsewhere, real estate classifieds business REA Group Limited (ASX: REA) is also suffering a tough 2019 on the back of warnings over listing volumes falling in Melbourne and Sydney.

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

You can find Tom on Twitter @tommyr345

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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