By Byron Kaye
SYDNEY, April 18 (Reuters) - Australia's No. 3 residential real estate agent McGrath Ltd MEA.AX blamed fewer than expected home listings for a profit downgrade on Monday, sending its shares tumbling and sparking concerns about growth in the country's red hot property market.
Although McGrath has just 3.2 percent of Australia's fragmented residential real estate listings market, the warning is feeding into fears Australia's property market is set to flatline, or even fall, after years of double-digit growth.
In a statement to the Australian Securities Exchange, McGrath said it expects pre-tax earnings between A$26 million and A$27 million ($19.9 million and $20.7 million) for the year to June 30, down a sixth from the A$31 million it forecast in an IPO prospectus in November.
"An unforeseen low volume of listings and sales started to emerge in the latter part of March 2016," Australia's only listed residential real estate agency said in the statement, adding that the low volume had continued into April, particularly in its home state of New South Wales.
Shares of McGrath fell as much as 34 percent to close down 31 percent at 90 cents, its lowest since listing, while the broader market .AXJO closed down 0.4 percent. The shares are yet to trade at or above their issue price of A$2.10.
McGrath also cut its dividend target to 3-3.5 cents per share, from about 4.5 cents per share, a reduction of up to one-third.
"The price it listed at was an expensive multiple to begin with, so it had high expectations, and they just haven't been met," said Winston Sammut, managing director of property-focused Folkestone Maxim Asset Management Ltd.
"This adjustment to earnings is based on a disappointment with two geographic areas of Sydney. What if that trend spreads elswhere?"
The Reserve Bank of Australia has kept interest rates at record low levels to drive the currency down and stoke investment to offset a commodities downturn, but has warned that some parts of the country's A$6 trillion housing market are overvalued as a result.
The share price response also underscores heightened levels of skittishness among investors towards newly listed companies, Sammut added.
When the company listed in December, founder, CEO and 27 percent shareholder John McGrath said the property market had hit a peak in the growth cycle but that the company depended on sales volumes rather than high prices for growth. = 1.3048 Australian dollars)