Why I think the REA Group share price is a buy

PHOTO: REA Group Limited (ASX: REA)

I think that REA Group Limited (ASX: REA) is a buy at this share price.

REA Group is the largest property portal business in Australia, it owns and operates various sites including realestate.com.au, realcommercial.com.au, Spacely and flatmates.com.au.

The REA Group share price has fallen 8% over the past month and a half, however I think its prospects look more compelling than in October.

Here are three reasons why I think REA Group looks like a good buy at this share price:

Property market continues to recover

The Australian property market has been roaring higher. In November 2019 we saw national prices go up 1.7%, Melbourne prices went up 2.2% and Sydney prices grew 2.7%. In the past quarter we’ve seen national prices rise 3.8%.

Not only does this give general sentiment support for everything related to property, but it supports advertising price increases for REA Group specifically. If REA Group maintains the same price to property cost ratio as in 2018 (when house prices were lower) then it would justify higher advertising prices for REA Group. Advertising online is a key part of the selling process, so REA Group could charge even higher prices over time.

REA Group has a very powerful brand, this should mean prices can go higher with little to no detrimental impact.