What’s Driving Domain Holdings’ Share Price Higher?

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The share price of Domain Holdings Australia Ltd [ASX:DHG] is up strongly today. At the time of writing, shares are changing hands at around $3.05 each. That means the price is up 14 cents or 4.81% on yesterday’s close.

Domain Holdings is a digital property listings advertiser. It made its debut back in November 2017, the result of a spin-off from parent company Fairfax Media.

Related: How to Invest in the Massive Infrastructure Boom. Click here for your free guide. 

What’s driving the share price higher over the last few months?

Half-year results posted back in February revealed earnings and profits were well down. Though we could note that revenues were holding steady, up marginally at 0.3%.

Not surprisingly, that news has brought in the low, so far.

But what is driving the share price higher from there? Often the news to justify the move comes out later.

As a forecast, full year earnings due in August are likely to come in somewhat better. Let’s wait and see.

What now for Domain Holdings shares?

As always, consult the company price chart.

Key levels to watch are around $2.65 and $3.10 or so. A break to either the upside or downside will tell you which way the wind is blowing.

That said, here’s just a few things to keep in mind…

Last year would have been a tough one for Domain. A cooling housing market saw a decline not only in house prices, but also a decline in auctions and new property listings. That impacts the bottom line.

But despite what you may read contrary, I’m not expecting any more major price falls.

Some of the comments in this area has been overdone.

House prices doubled over the last seven years or so. That can’t realistically go on forever. House prices were due for a slight fall.

Also, for house prices to fall further, you’d want to see some distressed selling.

Last time I checked, Australia’s unemployment rate is hovering around eight-year lows, and loan arrears for Australia’s largest home lender actually fell slightly recently.

None of that is ringing any warning bells.

Not to mention population growth and the huge infrastructure spend going on presently. Which should all provide some support for house prices going forward.

And here’s another reason house prices can go higher still…

Remember, it’s what the bank allows you to borrow that sets house prices. Tighter lending standards in the wake of the Royal Commission into banking have impacted house prices a lot.

This is something to watch.

A crackdown in investment loans has curtailed development. This could lead to bit of a housing shortage in a few years’ time.

And should credit start to loosen once more, the combination of a potential housing shortage and looser lending will all feed into the bidding up of house prices.

That might provide a nice tailwind for stocks like Domain over the longer journey.


Terence Duffy,
For Money Morning

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