** Morningstar says REA Group's REA.AX Australian segment, which accounts for most of group earnings, is seeing costs exceed revenue, although the rate of cost growth is declining

** Says rising costs signal competition with peer Domain, which was acquired by CoStar CSGP.O last year

** Property listings platform REA on Friday logged 24% decline in HY net profit, flagged high single-digit cost growth expected in FY26

** Morningstar does not expect conditions to improve materially for REA for the rest of the year as competition intensifies; rising interest rates likely to dampen listing activity

** Investment research firm maintains fair value estimate of A$137; says shares continue to screen as "materially overvalued"

** Stock down 8.3% so far this year, as of last close

(Reporting by Nikita Maria Jino in Bengaluru; Editing by Cynthia Osterman)

((Nikita.Jino@thomsonreuters.com;))