‘You can’t smell a mortgage’: Domain boss turns focus to home loans, pressures governments for stamp duty reform
Domain boss Jason Pellegrino is urging state governments to review taxes that make it difficult to enter the housing market as he flagged ambitions to invest heavily in the company’s home loans division.
Pellegrino said local and state governments should invest more in understanding what type of housing is in demand, but conceded there would be single-digit decline in residential real-estate listings over the next financial year amid forecasts house prices could fall as much as 20 per cent.
“Housing affordability… continues to be an issue and whilst prices are declining, price declines alone are not going to solve that issue,” Pellegrino said. “There is a range of issues that I think from a government perspective we need to step on… rather than sort of noting the problem and then putting it in the too-hard basket.
Domain chief executive Jason Pellegrino says there’s an opportunity for stamp duty reform to boost property sales.Credit:Arsineh Houspian
“We have to help with demand and help people into the market with government support and the like, but we also have to remove friction costs. The current structure of that cost puts an upfront penalty and impedes the transaction in that market.”
This is not the first time Pellegrino has pushed for the removal of stamp duty. He said in February there “needs to be political will” to move forward with reform. NSW announced in June it would follow the ACT in a switch from stamp duty to land tax.
“We’ve done some research that says that your average new home buyer, for example, a couple with two incomes, takes several years to actually save the money to pay for stamp duty and so that slows down the entire system,” Pellegrino said.
“[Stamp duty] also slows down the entire system on the way out, so people who are looking to downsize delay that decision and stop that property being made available for people who want to buy into it.”
The comments came after the release of the real-estate listing portal’s fiscal year 2022 results. Revenue rose 23.2 per cent to $356.7 million and net profit after tax increased slightly to $35.1 million. Earnings [before interest, tax, depreciation and amortisation] grew 21.4 per cent to $122.1 million, and the company will pay a full-year dividend of 4cents next month.
Domain said it expected costs – excluding acquisitions – to increase in the low double-digital range from the 2022 financial year base of $226.7 million. Nine Entertainment Co, the owner of this masthead, has a 60 per cent stake in Domain.
Domain chief executive Jason Pellegrino will focus on the company’s mortgage loans business.Credit:Louise Kennerley
Pellegrino said the company was growing its customer solutions division, which runs Domain’s home loans. He said there was no need for “material investment” in areas such as residential and property data solutions, but he is looking at ways to rapidly expand the mortgage broking business, which was launched in 2017. Revenue for the division was $9.2 million in the past financial year, an increase of 69 per cent.
“It’s got great unit economics, great customer feedback,” he said. “If we see the opportunity to scale that faster in a way that really drives value to our shareholders, we will absolutely look at that.
“You can’t smell a mortgage, you can’t touch a mortgage, you can’t feel a mortgage, you don’t know the colour of a mortgage. Why does the product not just exist purely online? Why do you actually have to have a physical distribution channel? The reality is, that is the future of that industry. It is the single easiest product to completely transact end to end online. That’s the future of that industry and we’re focused on the future.”
The company did not provide a detailed earnings forecast for the next financial year, but said costs (excluding the impact of acquisitions) are expected to increase in the low double-digit range from the base of $226.7 million.
A note from UBS said cost guidance for the 2023 financial year was higher than consensus estimates. Pellegrino said the only major inflationary pressure for Domain was from staff costs.
“A lack of talent in market, particularly driven by the closure of the borders, lack of immigration … lack of speed of the visa process… has really led to wage cost inflation over the last 12 months for us that sits in the high single digits; materially higher than what we’ve seen in previous years,” he said.
“As we look forward to FY23, our expectation is that will actually soften off back to the mid single digits. We’re starting to see a loosening of that talent market in terms of more talent being available, less competition for talent, particularly from the start-up sector in Australia.”
Domain shares were trading down 5.4 per cent to $3.83 before midday.
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