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The gateway to the Australian dream – REA Group w/ Owen Wilson | Summer Series

HOSTS Alec Renehan & Bryce Leske|30 December, 2021

Sponsored by Superhero

We’ve all spent hours trawling through realestate.com.au dreaming of our perfect home, but what’s the company behind this? The answer is REA Group (ASX:REA), the fourth business we’re analysing in our summer series. REA Group was founded in 1995 and has grown to become the 8th largest online brand in Australia. It has been a market darling of the ASX, delivering an eye-popping return of more than 14,000% since listing. Bryce and Alec are joined by CEO Owen Wilson for a fascinating breakdown of the business and their future plans.

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Visit superhero.com.au to learn more. Eligibility criteria, terms and conditions, and fees & charges apply. 

This episode contains sponsored content from Superhero.

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Bryce: [00:00:15] Welcome to another episode of the Equity Mates summer series, proudly brought to you by superhero over 12 episodes where deep diving into some of the most exciting, interesting and well-known companies from both here in Australia and over in the US, in some instances will be hearing directly from the CEOs to give you firsthand insight into their companies. My name is Bryce and as always, I'm joined by my equity buddy Ren. How are you going?

Alec: [00:00:38] I'm good, Bryce. We often ask our expert investors, what's the best company they've ever seen? And surprisingly, it's not Alphabet. No, it's not Apple. No, it's not Microsoft, sometimes. Sometimes Microsoft and also sometimes Alphabet, but number one in terms of most given answer in 2021. Realestate.com.au. Yes. And that is the company that we're looking at today. 

Bryce: [00:01:04] REA Group. That's it. Fascinating company. And we're going to dig into it in a moment. So we want to give a shout out to Superhero, who have sponsored the summer series. Superhero allows you to buy Aussie and US shares and ETFs with no monthly account fees, and you can now earn Qantas points with superheroes or visit superhero dot com. Today, you slash Qantas to learn more eligibility criteria, terms and conditions and fees and charges apply. But you're right, Ren REA Group. It's one of those companies that keeps on chugging along and is tied to one of, well, Australia's favourite assets. 

Alec: [00:01:45] Housing. 

Bryce: [00:01:47] so look, the ticker for REA, if you're playing along at home, is literally REA you can grab it on super hero platform if you want to check out more. And just a reminder before we get stuck in that, you can win $1000 into a Superhero wallet to start trading today just by listening to this episode, heading across to the Equity Mates Instagram page at Equity Mates and for the corresponding post for this episode. Just drop in one of your favourite facts from this episode. Ren and I remember every single fact that we talk about, so if you make it up, you're not going to win 

Alec: [00:02:19] how many companies in Match Group's portfolio? [00:02:21][1.9]

Bryce: [00:02:22] Forty five 

Alec: [00:02:23] 46. 

Bryce: [00:02:26] I was close, but yeah, leave a comment that is one of your favourite facts from REA Group, and we chose a lucky winner and announce it on our stories at the end of this week and you could walk away with a thousand in a trading wallet at Super Hero. So thank you, super hero. But let's do it. Ren are a group. What is it? 

Alec: [00:02:46] Well, Warren Buffett often spoke about buying the only toll road into town. Yes, the ability to raise prices, the ability to just tax any traffic that wants to come into that town. Toll roads these days, they're difficult to buy because Transurban bought them all. 

Bryce: [00:03:02] Yes, they're very expensive. 

Alec: [00:03:05] But if you were looking for a toll road on the Australian housing market, REA Group is as close as you're going to get. Every house that's sold in Australia pays a bit of a tax to area group to for the privilege of being able to be sold, and REA Group sits across the Australian housing market, aggregating all of them and setting the price. Really 

Bryce: [00:03:34] What a what a what a wind up.

Alec: [00:03:36] A toll on Australian Property. REA Group. Most people know what it is, so I don't think we need to get into too much. It's a property listing website. 

Bryce: [00:03:46] It owns realestate.com.au. It owns realcommercial.com.au, and it also owns flatmates.com.au And has a bunch of other businesses in in mortgages, mortgage, mortgage broking and product services for property and those sorts of things. So. Bit of a conglomerate in the in the property space. 

Alec: [00:04:05] Yeah, was was started by News Corp or did NewsCorp buy it.

Bryce: [00:04:09] I think they took a majority ownership stake

Alec: [00:04:12] ok, and then Domain was started by Fairfax? 

Bryce: [00:04:16] I'm not tight on that. 

Alec: [00:04:18] Okay, yeah. But either way, News Corp owns a fair bit of regroup and Fairfax owns a fair bit of domain. 

Bryce: [00:04:26] Yeah, NewsCorp owns a majority stake, I think. 60 odd percent.

Alec: [00:04:29] Yeah, okay. Probably the only thing that has value in News Corp.

Bryce: [00:04:32] We big time, one of the major contributors to the value of News Corp, is over anyway. 

Alec: [00:04:40] Maybe we'll do something we do News Corp later because that is a fascinating company going through transition, whereas REA group not so much going through a transition, just going through continual growth. It has a dominant market position in Australia and we will get into the numbers of the REA domain a little bit later. But yeah, dominant position in Australia, and it's now trying to expand horizontally into adjacent products and services. It owns smart line home loans and mortgage choice. Yeah, so it's. I guess getting into the mortgage adjacency, it also owns PropTrack, which is a leading provider of property data services, but it's just also trying to expand geographically as well. It owns a controlling interest in Area India. It owns businesses in Hong Kong, China and the US, as well as Malaysia, Singapore, Thailand, Vietnam and Indonesia. 

Bryce: [00:05:40] Yeah, it's big, yeah. And another fun fact this CEO's name is Owen Wilson. He's not the actor, but we are lucky enough to have him on the show to chat about his company at the end of this episode. So make sure you absolutely stick around for that to understand why so many experts think it is the best company that they've ever seen. 

Alec: [00:06:02] Now we say that Australians love property, but here's how much Australians love property. Think of the biggest online brands in Australia. Google Yeah. Facebook yeah. 

Bryce: [00:06:13] Twitter

Alec: [00:06:14] Probably Woolworths. Maybe, yeah. Yeah, maybe. Yeah, but real estate dot com today is the eighth largest online brand in Australia. Yeah, so it is front of mind for a lot of Australians. I mean, that makes sense. The basically, if you're going to sell a property in Australia, you listed on REA and then you, most people also listen onto mine. But I think the real power that REA has and the reason that a lot of the expert investors we spoke to say that REA is the best business is because REA comes first. Property manager like real estate agents, listen REA before domain and if for whatever reason, if they can only afford to list on one, it's REA Group,

Bryce: [00:07:02] given that it's in a bit of a duopoly. Poor domain. They've got a bit of work to do to catch up. So Ren, let's take a look at the industry because it is massive. The Australian residential real estate industry is nine point one trillion dollars, and the market size of the real estate services industry is expected to increase just shy of 12 per cent this year, off the back of growth of three and a half over on average between 2016 and 2021. But it's also an advertising sort of behemoth as well, with just shy of a billion dollars in total being spent in that space over the last, what, 12 months or so? 

Alec: [00:07:44] Yeah. Now here's a quote from the AFR and this is this highlights the importance of being clear when you write, I'm going to read you the paragraph, you tell me what it means. The total value so the nine point one trillion of residential housing, the total value of residential real estate in the country is now twenty eight point two per cent higher than the estimated value of superannuation. The ASX and commercial real estate, according to cold logic data. Now, are they saying superannuation, the ASX and commercial real estate combined? 

Bryce: [00:08:15] It sounds like it. 

Alec: [00:08:16] Yeah, because if that that's true, that is unbelievable. Yeah, I would be surprised by that because I mean, maybe super is super. 

Bryce: [00:08:24] Yeah. But look, nine point one trillion, it's it's a lot, not small.

[00:08:30] It's a lot you have. 

Bryce: [00:08:32] So look, there's no doubt that the industry that real estate area group is playing in is massive and we're experiencing some huge tailwinds in in real estate at the moment, given you know what's happening with interest rates and bank liquidity and that sort of stuff. And you know, the success of real estate REA Group is often tied to the success of house prices. 

Alec: [00:08:53] And let's let's be clear why that is. So in the past 12 months, home values climbed 20 percent, twenty point three percent, according to this data. If you're selling your house and you're seeing prices rise that much, however much REA group are raising their prices, you're willing to pay it because the majority of housing's housing searches start undermine or REA, and then people find out find houses that they like in the area. Then they find out auction times and they find out who the agent is like. It is the first point of discovery in the housing market, and if you're selling and prices are rising so quickly, you are going to pay whatever you need to pay to get in front of potential buyers. That is why I started this by saying that the toll road on the housing industry, because I just have pricing power, they can say, you pay us or no, no, no, you're selling. Some people might drive past that for sale. Sign out the front of your house, but most people don't stop. Most people are like, I'll look that up on area or domain later. Absolutely. So that is the power of this business. The question becomes if the housing market starts sliding 20 percent, how much pricing power does area and domain have? Will they be able to raise their prices? The unfortunate thing for us trying to do that analysis is in the time that RDA Group has existed, house prices have never slid, so it is purely academic. 

Bryce: [00:10:23] So I want to talk to Owen about this because he actually quoted in their latest results that he believes they actually perform better in a slower market, not a declining market, but a slower market than what we're seeing at the moment in terms of house price price growth. Didn't elaborate on that, but I'm interested to understand why. 

Alec: [00:10:40] Let me posit a reason why. So talk money to me. Another podcast in the Equity Mates stable Candace and Felicity spoke to Simon from Luxe listings, and he was talking about the amount of off market transactions. Because the market was so hot, all of the really in-demand property was just being sold before it even made its a list of publicly. And so maybe when a market is this hot, does it get on? People are just getting above the price that they want without having to go through any of the traditional channels of area. Group domain, auction, open houses, all that stuff. And so maybe when the market's less hot, you need to do a bit more advertising work to get people excited. And that's good for REA. When a market is this hot, people are like, We don't need you. We can. We can sell a house without, without, without advertising. Open house 

Bryce: [00:11:34] good thesis. Sounds pretty. Sounds pretty solid. We'll make sure that we ask Owen about that in a second. But Ren, let's have a quick chat about the duopoly that's going on because it's definitely a David and Goliath sort of place. 

Alec: [00:11:45] So you put David and Goliath in the notes. I think that is just the so unfair on domain. They're not they're not David in this situation. They're like Goliath, younger brother. 

Bryce: [00:11:57] They're significantly smaller. 

Alec: [00:11:58] Do you would you call Coles a David? 

Bryce: [00:12:00] No, no. I think the gap between Coles and Woolworths is not the gap that's between Domain and REA. 

Alec: [00:12:06] Yeah, yeah. Well, Coles is about half the market value of Woolies? 

Bryce: [00:12:10] Well, not necessarily on market cap. I think if you look at market cap, probably even bigger, but just in terms of like some of the numbers around it, like the website visits to well, firstly, REA was first to market in 1995, and I think Domain was fused late in 99 or 98. But the web traffic is just phenomenal. 

Alec: [00:12:30] Woollies is about two and a half times bigger than Coles, about 20 to 50 billion. Domain is three billion and REA is twenty one billion. There you go seven times, David and Goliath. 

Bryce: [00:12:43] So in October, this is not unique visits. This is going to be total visits, but in October, this is according to REA Group's report as well. They had 145 million visits to their website. Okay. I think that equated to about 3.5 to four times the size of Domain. Okay, so pretty significant in terms of website traffic. I had a look as well. They. People spend longer on REA than they do on Domain, and they visit more pages on REA than they do on domain. And there are more listings on RCA that are in demand. So to your point, as that's the first, it's the one stop shop. Yeah. If you're going to advertise, you start it. It feels like you start at REA. 

Alec: [00:13:27] This isn't a two sided marketplace. You're not buying houses through. REA's website has the dynamics of a two sided marketplace in the sense that because it has more bought, it has more listings. More customers are going there to search. And because more customers are going there to search, more people choose to list their if they're only going to list on one place. And so that that builds a really strong network effect, which is really hard to disrupt. It's really hard to build that two sided marketplace because you have to get both customers and set like listings on on. But once you get them on and once you have that dominant position, it's really hard to break really hard.

Bryce: [00:14:06] Yeah. And for those that love the numbers, I found this interesting. So REA is, you know, a hundred percent digital domain, though, still has a few of the newspaper and magazine. 

Alec: [00:14:15] Mine is still in, like the Sydney Morning Herald. 

Bryce: [00:14:17] Yeah, yeah. So that's about contributes to about 10 per cent of their revenue, but the impact of that is on their margins. So gross margins for REA Group is between 70 to 78 domains, gross margins 56 to 60 percent over the last few years. So that obviously has the impact on the bottom line and cash flow and the ability to invest back into the business and those sorts of things. So small nuances between the two, but could be impactful over the long term. 

Alec: [00:14:43] Yeah, some people like flicking through the I don't mind, 

Bryce: [00:14:46] but usually when I'm travelling, that's it. 

Alec: [00:14:48] I feel like it's not good for our mental health to look at all these houses we'll never be able to buy. 

Bryce: [00:14:52] Well, I found this really fascinating. I think the market's so hot at the moment that a lot of them aren't even putting prices on prices on that. So it's just auction or contacts seller. And there's, you know, two or three years ago you could, you know, six hundred thousand a million, whatever, whatever. But that's just like contact, contact, contact, contact. They don't want to anchor people to what could be a million dollars more.

Alec: [00:15:14] Yeah, that's crazy. It is crazy. I mean, we've spoken to a few people who are trying to buy at the moment, and they're just like everything goes 30 to 40 per cent of the price guide. Yeah. So it's like just the price guide. Not ideal. So anyway, housing market's hot, not a surprise REA are a lot bigger than domain, somewhat of a surprise, but I think this business is just a based, and there's probably not a lot more that needs to be said about it. Let's maybe talk about just the financials quickly just to give people an idea of what it looks like. But then let's jump into the interview. Yeah, let's do it, because I'm pretty keen for that. 

Bryce: [00:15:52] Yeah, sure. So as we said, twenty one point eight billion market cap at time of recording, they've just released their quarterly results for the first quarter of FY21 and that 22 per cent revenue growth despite COVID lockdowns. Revenue of just over a billion in the financial year ending 2021, which was up 14 percent, 693 million gross profit last year, up 10 percent and some pretty strong cash flow of 300 million bucks on the balance sheet. 

Alec: [00:16:24] So of that billion in in revenue, they did just over 300 million in profit, 322 million. So pretty healthy margins as well. That's the business. Obviously, 2020, it fell back a little bit. There was a lot of disruptions with lockdowns and all of that, but just powdered this year again ploughed ahead. 

Bryce: [00:16:47] And we're going to hear from Owen Wilson just after this ad break as to his views on the property market and everything that's going on at REA Group. So stick around for that, but we'll just hear a quick word from our sponsors. So Owen Wilson is the CEO of REA Group, and prior to becoming CEO in 2019, he was the CFO since 2014. Owen is also a director of the Hawthorn Football Club, and we are so excited to have Owen with us today to discuss all things REA Group. So, Owen, welcome to Equity Mates. 

Owen Wilson: [00:17:19] Thanks very much, Bryce. 

Bryce: [00:17:20] So Owen, we love to start these conversations by asking the CEO to describe their company in their own words. So what is REA Group? 

Owen Wilson: [00:17:30] Well, essentially we're a digital property advertising company. We've got about 20 eight hundred employees across about four continents. We are clearly the number one player in Australia with realestate.com.au Donohue. We also have the largest commercial business in Australia with Real Commercial Ticonderoga and the largest share accommodation in Australia with Flatmates Second Avenue. We've got a majority stake in a business called REA India, which operates the Portal Housing.com and another business called Up Tiger Dot Com, which sells apartments. We've got a 20 per cent stake of real sitcom in the US, which is the number two to Zillow, and we've got an 18 per cent stake in Property Guru in Asia, which has got the number one side by a long way in Singapore, Malaysia, Thailand and Vietnam. Yeah, well, we're also into financial services. I shouldn't lift that off, but we we reach 95 per cent of the mortgages in Australia at the moment and we have our ambitions there and we also have a data business at the moment. We monetise that by preparing valuations for banks. And so we've got a lot of property data and consumer data that is a great opportunity for us going forward. 

Alec: [00:18:47] Yeah, I think that's it's important to stress that REA Group is a lot more than real estate dot com didyou, and we're excited to unpack some of some of those aspects of the business today own. But let's stick on that data point because when we think about, you know, the position that you hold CEO of REA Group, one thing that you must have is just so much unique data on the Australian housing market. And I imagine it gives you the ability to form some pretty unique insights that we would love to sort of tap into today. So when you look at the Australian housing market, how do you assess the health of the housing market? Do you think there's anything that the financial media is getting wrong about the market at the moment from your from your perspective? How's it looking 

Owen Wilson: [00:19:33] at? The market at the moment is incredibly strong. And as you said, we have an incredibly unique perspective on what's happening and the primary reason for that is our incredible audience. On any particular month, we have, you know, around 13 million people visit our site and we can tell from their behaviour on their site whether they are, they're dreaming, whether they are actually in the market to buy. And we track things like visits to properties, sharing of properties and enquiries off our platform for properties. And so we have probably the most accurate view of what's happening on the demand side for property, which underpins what's really going to happen in the market. And so that gives us a unique perspective. As we sit today, the market is incredibly healthy. If you look at that sort of supply versus demand equation, it's fair to say that the demand side of that is still stronger than the supply side. It's why properties are moving incredibly quickly. It's why house prices are still going up. And if you look forward on that, we don't see that changing anytime soon. As recently as October this year, we had record buyer enquiries coming off site, which shows that that demand is still there. And as we look into 2022, you know, with foreign students returning at some stage and the borders are open and the return of migration into Australia, that's only going to, I think, have an upwards push on demand for property. And therefore I think the property market is going to stay strong for quite a while. You couple that with massive bank liquidity and record low interest rates right through next year. I have a very positive outlook for the market and I think that, you know, you talk about where the market might sometimes get it wrong. I'm saying people were already predicting house prices falling at some stage. Ultimately, if demand is higher than supply, it's very hard to see those prices coming down and what we can see is the demand side. And that's still very strong at the moment. 

Bryce: [00:21:31] That's not what I want to hear. But you know, what is a dreamer on your site? How do you identify a dream? I'm sure I would be one owned that just goes on and plugs in places in Vaucluse to get an idea of what a twenty five million dollar property looks like. Is that how you define a dream? 

Owen Wilson: [00:21:50] Pretty much. I mean, I probably classify it as a dream on site, so I or sticky beak one or the other. I just love to see I've got so many sites. Searches, and I just love to see kind of every poppy that's coming on the market in my suburb around my price point. The dream is a typically on the sign a lot they don't just looking one location characterised by never taken that next step. You know, the next step of saving a property, one of the properties it looked at or sharing it with a partner, or more to the point, making an enquiry and going and having a look. Yeah. So, you know, it's based on the activity they're doing on the site. Yeah. Yeah, we love the dreamers because eventually dream has become.

Alec: [00:22:31] That's it. That's it. That is what Bryce and I dream about one day taking that step. 

Bryce: [00:22:36] It's like the pipeline. Yeah, yeah. 

Alec: [00:22:39] Own one question. We often ask expert investors when they come on the show is what's the best company they've ever come across? And you'd be happy to know that REA Group is the most common response to that question. And it's pretty clear to say why REA just has this dominant position in the Australian listing market, which really leads us to two questions. The first one is when you look at your business really and the Australian business in particular, how do you think about maintaining this dominant position and ensuring that you stay ahead of domain or any other competitors that might come and challenge you? 

Owen Wilson: [00:23:15] So there's two things we think about in terms of our market leadership in Australia. The first is our audience and and we describe our audience as the air we breathe. It gets maniacal focus on daily, weekly, monthly. Our audience numbers. And so we spend a huge amount of time just continually trying to improve that consumer experience, make it an even more delightful time each time you come to our site. You know, I think we've done pretty well in that, but we can never, ever rest. You know, tech is changing. You've got machine learning. You've got augmented reality. You've got so many ways that we can say the way that people look at property changing over time and we need to make sure we stay ahead of that curve. The second element is on the customer side. And so, you know, we describe our audience as consumers and we describe the agents who put the advertisements on our site. The company listens on our site as our customers, and again, it's making sure we continue to make driving value to them with more leads, better leads, more information about the leads so that they can see the payback of having open listings on our site, which gives that kind of exchange with our consumers as well. I know they come to our site and they get one of the richest property content experiences you can get in Australia. 

Bryce: [00:24:36] I guess the following question if we just think about the domestic market because we'll touch on international in a second. But where do you see future growth coming from if you have such a dominant position at the moment? 

Owen Wilson: [00:24:46] So in many areas, if you think about our core buy sell offering you, we monetise actively the sell side through people buying at least properties on our site. But we also know that a lot of consumers come back. So when they're thinking to sell and again, we can tell by the behaviour they're looking in the sale section, they're looking at kind of historical transaction and information on properties rather than what's the sale? And we've never monetised connecting those prospective vendors with our customers. And yet there's a huge value. There is still an enormous play on data. You know, we've got the richest property data in the country. We're building our new valuation models every day and, you know, we see a great opportunity there. Financial services is another one. We currently reach originate about five percent of the mortgages in Australia. At the moment, we see a huge opportunity. They are effectively to be the Switzerland of mortgages for consumers. What we want to do is get you the best deal and get it to you the quickest that we can. And so we've got plans to digitise the mortgage process. We've got nearly a thousand brokers across Australia who can meet with you and give you the advice for free that you need and try and get you the best deal in the market. And so again, connecting that audience with our finance offering is an enormous opportunity. They still are also, we think, a long way to go on rent. Anyone who's rented a property in Australia will know that there are an enormous number of pain points across that process, whether that be, you know, the way you, your family is with a property manager, whether it's, you know, coming up with a bond that just sits in an account and does nothing to the that you're renting. There's so many parts of the process that are painful, and we think we can improve those processes and and provide a service both to property managers, landlords and tenants and make it a much more streamlined process. 

Bryce: [00:26:44] We did have a rental idea business between our mates, but only if I tell you now we might have to take it off because it could be a billion dollar business. 

Owen Wilson: [00:26:54] So we'll talk

Bryce: [00:26:58] afterwards. Talk off line. No, we agree we're both renters and have been for a while here in Sydney, and there are plenty of pain points, you know, looking at the photos online and then being bitterly disappointed when you get there about the disconnect between what's posted online and the reality. And yeah, we had it. What was it called rent money?

Alec: [00:27:17] We'll take it. I'll tell you the fly. But if we if we turn to the broader REA group business because a lot of people often mistake, REA is purely a domestic play. But as you mentioned before, you have a footprint across four continents and you know you've got some, some serious growth opportunities in other markets. But as CEO, I imagine that creates a lot more complexity than just managing a purely Australian team. So how do you approach that task of finding these growth opportunities and then building the teams to execute on these growth opportunities outside of Australia 

Owen Wilson: [00:27:58] in terms of identifying where to go into what markets are attractive? There's a lot of things we look at. We look at everything from internet and mobile device penetration to the uptake of data plans, the size of the of the real estate advertising market in the country. We're in the maturity of the of the move from what I'll call all will print to digital. And then also whether we can, you know, there are portals in every, every, every country in the world. Basically, it's whether we can get a position either number one or a number two that we think we can take to number one because we think market leadership is really important in this space. And so if you take a country like India, for example, where last year we took a majority stake in the company, we're invested in its in the fastest growing trade in dollar economy in the world. And if you look at India's propensity to invest in property, they've got a strong record of home ownership property. It's also a bit like we do. It's a big potential advertising market and we invested in a business that was probably number two or three. But already, you know, we've almost reached audience leadership position in that country. So we're incredibly excited that the kind of the potential for that market, for property, for advertising. It's a great market and we think we can get a lot of value there and deliver value for our shareholders. Similarly, in Asia, we sold our business into property group in Asia this year and we now have a stake in the clear number one in, I think, the most attractive market in Southeast Asia. You know, Malaysia, Singapore, Thailand and Vietnam. And in terms of managing those, it's it's it's all about having great people on the ground, people you trust, people who can get on with it. People understand how to drive value in these businesses and in finding the right connexion points between the different markets because every one of these markets is so different to Australia. And so there are things that translate between markets easily. And then there are others that that don't because of the different nuances. And it's about understanding, you know, way to add value. And we're not to touch certain aspects of the business because it's quite different. 

Bryce: [00:30:10] I'm interested to know on, you know, Australians are obsessed with property. It's the Australian dream buyer house. That's how many many people have built wealth. And it's just sort of a core of who we are as Australians. Where does that stand to other countries around the world? Like, are we in the majority or are we in the minority when it comes to like our approach towards property? 

Owen Wilson: [00:30:32] I would say based on kind of in the markets I've looked at, I looked a lot. I think we would rank if there was a gold medal at the Olympics. I think we would probably win it hands down my property list country in the world. I mean, one of the lenses on that, you know? So in October, we had about one hundred and forty five million visits to our site. It's crazy. We've only got twenty five million. I'm not. If you take out the kids and possibly, you know, the elderly who aren't interested in property, that's an enormous interest in property in this country. And you can see it in the amount we spend on advertising our property. We are we probably visit our properties the best of anywhere else in the world, and that's great for our business, but it's also great for consumers when they're buying. You say the property presented in a great line. India has as a very strong property ethos. It is seen as a way you will build wealth over time in that country. And similarly, in places like Singapore, Vietnam, very strong property ownership kind of ethos in the country, which bodes well for us.

Bryce: [00:31:41] Yeah, it's interesting. 

Alec: [00:31:43] Yeah. Maybe. As well as exporting your knowledge and your tech, when you go to these other countries, you also need to export that Australian mentality of buying a home and then buying a second. 

Owen Wilson: [00:31:53] Well, that is something we do try and one of the things we try to do in this country, at least the experience. You know, if you go on to the portals in many countries, even in mature places like Europe and you compare the experience in the way properties presented to here, it's it looks pretty awful. And we're absolutely of the view that if you amplify that experience, you'll get greater consumer engagement and you just help the whole market. So we do want to take a lot of what we do well here in Australia and property to the offshore markets. 

Alec: [00:32:25] So speaking of offshore markets, REA Group has a presence in the US and we've been watching the recent Zillow saga with a lot of interest. So we'd love to pick your brains and I guess, get your view on it. So for people that are unfamiliar, Zillow is a listing site over in the US, and they moved into algorithmically buying houses as well as just listing them on the website. And they've recently exited the business after losing a fair bit of money, and now they're trying to sell the houses that they own off. So it was probably a failed venture, but it was a really interesting one at the time. And I know there was some Australian fund managers, some pretty notable Australian fund managers that were very excited about that business extension for Zillow. So sitting where you are as CEO of Area Group, how did you view that business extension at the time? And I guess in hindsight, now that it's failed, is there anything that Zillow got wrong about the housing market that that they they should have been aware of? 

Owen Wilson: [00:33:29] Look, I have to say, you know, we we watched that incredibly closely because, you know, if if it became the way that consumers preferred to transact on property, then it would have found its way to Australia in some form. And therefore, you know, we watched it from day one very closely. I have to say from day one, I was incredibly sceptical about the ability for that to become a significant earner. And one of the reasons was, you know, is effectively flipping properties and, you know, they were buying properties they were sending a crew into to fix them up and giving them like a pint or fix anything that needed repairing. But the reality is to make money on that. They had to effectively buy it below market from the consumer. And that's a pretty awful consumer proposition that I'll buy your house off you below market so I can make some money on it. Now the proposition was it's instant. So you got any instant sale. So if you were in a hurry to sell a desperate seller, you know it was a service you would probably pay for by taking a discount on your market value. But I think the vast majority of consumers didn't want to do that, and then they saw the transaction costs. So, for example, that model I couldn't see working here in Australia with stamp duty and stamp duty could just throw it out of the water from a profitability perspective. But there's also transaction costs in the US. They were paying agents to sell the property, and so that's about three per cent commission. There was a cost to the repairs. There were the taxes and then, you know, they just couldn't turn into a profit. And so it's a fairly major reversal of of a very big strategy to pull the pin on that. Having been talking it up for so many years, 

Bryce: [00:35:19] yeah, big change. So, oh, and we have been asking every CEO that comes on about sustainability, a very important topic for Equity Mates community. So how are you approaching sustainability within REA Group? 

Owen Wilson: [00:35:33] We take sustainability incredibly seriously. All aspects of sustainability overview you. Any corporate worth their salt should be taking action. You know, it's on all of us to do this and we can get frustrated with politicians. But the reality is we can control what we do. And so let's ignore what the politicians are doing. Just take action ourselves. So I'm really proud. REA is a certified carbon neutral organisation. We made a decision two years ago to do that. We've done that two ways. We have got a carbon emissions reduction target certified externally, and she was really placed here in Australia. We reduced our carbon footprint by 20 per cent. If you even include any business in India, we still reduced by three per cent. And so we think we're going to have a lot to do with that business to to bring them in on the journey. So we're really placing certified carbon neutral, but we're not done. We want to have carbon emission reduction targets going on. We're looking at investing heavily in solar. We've got a very big office footprint here in Richmond, in Melbourne, and it's got a perfect format to do that. So we want to work that landlord and try and reduce the entire electricity consumption of that building and then build sustainability in all forms. And so, you know, we work with our customers to work out how the property industry can help with this by building more sustainable building. I'm advertising those that are a our energy right it. And kind of try and force that agenda, because that's where so much of the carbon emissions come from. And then across all the other kind of social environment and governance aspects, we invest heavily in cybersecurity. We're massive on diversity, really plays out. We're excellent workforces, 50/50 gender diverse leadership team. It can't be fifty fifty nine point five female, full male. You know, it's all of the aspects of sustainability really important to us and our staff. And it's one of the, you know, we have a very young workforce and it's something, you know, they would demand of us, even if if we had if it wasn't important to me.

Bryce: [00:37:35] Mm hmm. 

Alec: [00:37:35] Good to hear. Well, I've got to say so. I I'm in Sydney now, but I used to be down in Melbourne working for Coles, and I remember when anyone. There were a couple of people that left Coles to go and work at REA Group, and the overriding feeling was just one of jealousy. I remember because REA has this reputation, at least in Melbourne, by seeing everywhere of just being a really great place to work. So we really appreciate you taking the time to talk to us today. And you know, the business is incredible as well. But the success story to date has been something to behold. But you know where investors today and we're looking forward and we love thinking long term here at Equity Mates. So if you think about REA in 10 or 20 years time, what does success look like for you?

Owen Wilson: [00:38:24] Our purpose is to change the way the world experiences property. And if you think our ten years or even 20 years, if we've delivered on our purpose, the way people transact on property, the way people find rental properties, engage with landlords and property managers, that will change significantly. Why people get a mortgage will change significantly. We've just launched our loan tracker offering. Would you tell us about your mortgage details? Sit back and relax. We'll scan the market every single month for you across three thousand products. And if we find one better for you. We'll let you know and if you want to do something about it. And so I think the way people interact with the entire property journey will improve and change, and we want to drive that, you know, specifically in 10 years time, I'd like to think we are a clear number one property for India by a long way, you know, with it with a significant sustainable lead. We would five percent of mortgages today and we said, you know, we want to do one in 10 mortgages for Australians and we want to give them, as I say, the fastest approval and the most choice in the market. So that will change. I think the way people Ren properties. If we succeed, as I think we will, it'll be a much more pleasant experience than it is today. And, you know, so if we deliver on all of these things, we'll create value for our shareholders. We'll create value for our consumers and will create value for our customers. 

Bryce: [00:39:45] Sticking on the question of looking to the future own, you are a director of the Hawthorn Football Club and Alec and I are a massive footy fans. I'm a bombers man which will excite you. And Ren is a Swans fan who makes the fly who makes the final grand final 2022. You're obviously going to say Hawthorn

Owen Wilson: [00:40:06] it's always hard to pick. The Hawks finished outside the AFL this year and we also got the backline. I think our next Premiership side and we've got some great draft picks. It'd be pretty big call to come from outside the eight to win the fly. So I'd say 

Bryce: [00:40:24] that's I was expecting you to say Hawthorn, but I respect that. 

Owen Wilson: [00:40:28] But we we have we have silverware in our sights in the next few years. Don't you worry about that? Look, it's hard to go past when you sit here at the end of the season. I mean, it's Melbourne where, yeah, it's no good and they've kept their side together. They probably augmented it a little bit. It's very hard to see it go past them as the Bulldogs have recruited well and so they will be a contender again. And so, you know, you go through that to fall from this year and it's hard to pick one that's going to fall away. You know, even Geelong have picked up another copperplate. So I only this time of year for the current year, grand finalists sometimes works. I pick the Panthers for the NRL premiership this year at the start of the year because they were runners up before. Nice, but you know, that's where my money would be. Probably the dogs or nice.

Bryce: [00:41:14] My bold prediction. Geelong don't make top six. That would be. Look, I don't know if that's very bold, 

Owen Wilson: [00:41:19] but I don't look like they're in their sights. Aren't getting any younger. Yeah, yeah. 

Bryce: [00:41:25] Yeah. Anyway, we're not here to talk for a week 

Alec: [00:41:29] now, but we we should leave it. But Owen, we really appreciate you taking the time and would love to do it again. But in the meantime, good luck with everything as you stretch that property empire around the world.

Owen Wilson: [00:41:43] Very much appreciate like nice Bryce really enjoyed it.

Bryce: [00:41:46] Ren lost one. Ren always great to hear from the CEOs of these companies. Enjoyable interview. So thanks to Owen for making the time.

Alec: [00:41:54] Yeah, and a big thanks to Superhero for sponsoring this episode. Couldn't do this without. You, if you are interested in REA Group or any of the other companies available on the US or the Australian market, you can head over to superhero and look them up. Get more information on them today.

Bryce: [00:42:11] That's it. Remember, head across to our Instagram for your chance to win a thousand bucks by leaving your favourite fact from this interview on the comment section for the Post for REA Group. And stick around for next episode as we head across overseas and take a look at Beyond Meat. One of those companies going into the meat substitute business. So, yeah, fascinating company, and we can't wait to pick it up next episode.

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Meet your hosts

  • Alec Renehan

    Alec Renehan

    Alec developed an interest in investing after realising he was spending all that he was earning. Investing became his form of 'forced saving'. While his first investment, Slater and Gordon (SGH), was a resounding failure, he learnt a lot from that experience. He hopes to share those lessons amongst others through the podcast and help people realise that if he can make money investing, anyone can.
  • Bryce Leske

    Bryce Leske

    Bryce has had an interest in the stock market since his parents encouraged him to save 50c a fortnight from the age of 5. Once he had saved $500 he bought his first stock - BKI - a Listed Investment Company (LIC), and since then hasn't stopped. He hopes that Equity Mates can help make investing understandable and accessible. He loves the Essendon Football Club, and lives in Sydney.

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