When PEXA (ASX: PXA), the online property exchange, floated in July 2021, we wondered if things were as good as they’d get. We may have only been out by six months.
The total number of property transfers in Australia peaked at 1.7 million in the December half of 2021 and were down by 20% in the same period in 2022. To be fair, PEXA’s share of those transfers increased from 80% to 88%, but that’s more a reflection of the ongoing shift from paperbased to electronic conveyancing, where it continues to be the only game in town (although more on that in a moment). Even so, PEXA’s transfer volumes fell by 16%.
Things have gone better for mortgage refinancings, which have already shifted almost entirely to electronic processing and where PEXA has a 99% market share. With homeowners scrambling for better (or at least less hefty) rates, transaction volumes actually rose by 7% over the year to a record level.
However, there are only two refinancings for every five transfers and they attract lower average prices ($49 compared with $87), so revenues fell 7% in the half even with a 5% price rise. Operating costs rose 8%, so that underlying earnings before interest, tax, depreciation and amortisation (EBITDA) for the core PEXA Exchange business fell 15% to $71 million.
We have no special insight into the property market, of course, but it does show how things can go in a highly leveraged business, with total market dominance, when that market turns down.
Our real concerns are around the potential for competition to come in and smash that dominance. Regulators are forcing PEXA to make its systems “interoperable”, so that rival exchange platforms will be able to interact with it, specifically to negate any network effects and to promote competition.
Esta historia es de la edición June 2023 de Money Magazine Australia.
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Esta historia es de la edición June 2023 de Money Magazine Australia.
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