Key Takeaways
- • Sydney-based hedge fund Bristlemoon Capital, led by George Hadjia, is short Australia's largest real estate listings company, REA Group, betting on an intensified property price slump.
- • Bristlemoon projects REA's listing volumes to fall 5 to 10 per cent in FY27, versus REA's own guidance of flat to down by low single digits, and sees a near 40 per cent share price decline to below $100.
- • REA shares have already dropped 15 per cent this year to $156 on the ASX, and Bristlemoon's $98 price target assumes a P/E contraction from 26 times to 20 times.
- • National home prices have fallen for six consecutive months, down 5.2 per cent from their March peak, driven by RBA rate rises and changes to capital gains tax and negative gearing.
- • Ten Cap's Jun Bei Liu maintains a long position on REA, arguing price increases and enhanced products can offset softer listing volumes.
Summary
Sydney-based hedge fund Bristlemoon Capital is targeting REA Group, Australia's largest real estate listings company and operator of the country's premier online property platform, with a short position based on an intensified property price slump. Led by George Hadjia, the fund believes investors are underestimating the impact of the Reserve Bank's aggressive interest rate cycle and recent federal budget tax changes. REA earns its revenue by charging agents and vendors fees to list properties, and its shares have already fallen 15 per cent this year to $156 on the ASX.
The broader backdrop is weakening. National home prices have declined for six consecutive months, falling 5.2 per cent from their March peak, as RBA rate rises and government changes to capital gains tax and negative gearing weigh on the market. Central bank minutes pointed to further rate increases, and the International Monetary Fund warned of high inflation in Australia. AMP is forecasting a peak-to-trough decline of up to 15 per cent. Hadjia noted that past Australian housing downturns have typically lasted around 11 months, implying price falls could continue into early 2027.
Bristlemoon argues REA's earnings expectations require significant revision. While REA forecast new listings to be flat to down by low single digits in FY27, Bristlemoon expects a sharper decline of 5 to 10 per cent in listing volumes, which it believes could drive a near 40 per cent share price plunge to below $100. Bristlemoon also argues REA's price-to-earnings ratio of 26 times is too high given market risks, and projects a core earnings decline and a multiple contraction to 20 times, supporting its $98 target.
The bearish view is not unanimous. Jun Bei Liu of Ten Cap maintains a long position, believing REA can offset softer volumes through price increases and enhanced products. Some investors suggest weaker markets could prompt owners to buy more expensive listing packages, although Hadjia contends that this shift could be delayed.
The broader backdrop is weakening. National home prices have declined for six consecutive months, falling 5.2 per cent from their March peak, as RBA rate rises and government changes to capital gains tax and negative gearing weigh on the market. Central bank minutes pointed to further rate increases, and the International Monetary Fund warned of high inflation in Australia. AMP is forecasting a peak-to-trough decline of up to 15 per cent. Hadjia noted that past Australian housing downturns have typically lasted around 11 months, implying price falls could continue into early 2027.
Bristlemoon argues REA's earnings expectations require significant revision. While REA forecast new listings to be flat to down by low single digits in FY27, Bristlemoon expects a sharper decline of 5 to 10 per cent in listing volumes, which it believes could drive a near 40 per cent share price plunge to below $100. Bristlemoon also argues REA's price-to-earnings ratio of 26 times is too high given market risks, and projects a core earnings decline and a multiple contraction to 20 times, supporting its $98 target.
The bearish view is not unanimous. Jun Bei Liu of Ten Cap maintains a long position, believing REA can offset softer volumes through price increases and enhanced products. Some investors suggest weaker markets could prompt owners to buy more expensive listing packages, although Hadjia contends that this shift could be delayed.
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