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The housing market appears to be recovering, but are ASX property stocks showing it?
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This time last year a housing slump had gripped the market. But in 12 months the situation has improved.
A housing bubble occurred between 2012 and 2017 and it seemed that bubble had finally burst.
While interest rates had room to move, at 1.5 per cent, it appeared unlikely that they would have a substantial impact unless they went in the opposite direction.
Buyers enticed back to the market
But in the last several months, with the election result as well as interest rates and tax cuts, the property market appears to be in recovery mode. The Australian Finance Group (ASX:AFG) released its Mortgage Index this morning.
In the December quarter, $15.4 billion home loan applications were made, up 19 per cent from two years ago.
“We’ve been seeing higher levels of activity for three to six months,” AFG CEO David Bailey told Stockhead.
“Our index in September showed positive times and that trend continued and closed out the year.”
New South Wales made the greatest gains, up 25 per cent. At the other end, Western Australia was flat, although Bailey noted it was “probably the best we’ve seen in four to five years since the [last resources] boom finalised”.
The average mortgage size was $539,000, 6 per cent higher than the same time last year.
Curiously, 47 per cent of lodgements came from sources other than the major banks (AFG’s definition — not only the Big 4 but BankWest, Bank of Melbourne, BankSA and St George as well).
Among property investors more than half went elsewhere for the first time ever, as did all buyers in Queensland and New South Wales.
First home buyers remained relatively tied to the majors, with only 36 per cent looking elsewhere for a home loan.
First home buyers re-entering the market
First home buyers accounted for 15 per cent of all loans — the highest since the first quarter of 2013. This figure dropped as low as 7 per cent since then.
Conversely investors have gradually declined, with 26 per cent of loans coming from this group. This figure was as high as 40 per cent in 2015.
“First home buyers pick up when investors slip away and it’s generally an indication that affordability is stronger,” Bailey said.
“There are several incentives out there across the states. We’d expect newer incentives beginning this year to have an impact as they take hold.”
Small cap players
ASX real estate small caps in the last six months are up an average of 1 per cent, while on a yearly basis they are down 7 per cent.
| Code | Name | Price (I) | 6M Tot Ret | Market Cap |
|---|---|---|---|---|
| EGH | EUREKA GROUP HOLDINGS LTD | 0.385 | 53 | $92.0M |
| MEA | MCGRATH LTD | 0.32 | 49 | $53.4M |
| AXI | AXIOM PROPERTIES LTD | 0.051 | 24 | $22.1M |
| AQR | APN CONVENIENCE RETAIL REIT | 3.66 | 14 | $330.6M |
| LMW | LANDMARK WHITE LTD | 0.155 | 14 | $24.9M |
| APZ | ASPEN GROUP | 1.18 | 12 | $109.8M |
| LHM | LAND & HOMES GROUP LTD | 0.01 | 11 | $10.5M |
| AGJ | AGRICULTURAL LAND TRUST | 0.05 | 11 | $5.4M |
| BWR | BLACKWALL PROPERTY TRUST | 1.38 | 11 | $205.7M |
| TGP | 360 CAPITAL GROUP LTD | 1.1 | 7 | $251.7M |
| VP7 | VELOCITY PROPERTY GROUP LTD | 0.03 | 7 | $12.0M |
| DGH | DESANE GROUP HOLDINGS LTD | 1.465 | 6 | $59.9M |
| SDG | SUNLAND GROUP LTD | 1.7575 | 6 | $242.3M |
| AVJ | AVJENNINGS LTD | 0.615 | 5 | $253.9M |
| QPR | QUATTRO PLUS REAL ESTATE | 1 | 5 | $90.0M |
| MPX | MUSTERA PROPERTY GROUP LTD | 0.3 | 3 | $30.9M |
| APW | AIMS PROPERTY SECURITIES FUN | 1.5 | 3 | $67.3M |
| ERF | ELANOR RETAIL PROPERTY FUND | 1.23 | 3 | $158.3M |
| GDF | GARDA PROPERTY GROUP | 1.415 | 0 | $259.4M |
| FRI | FINBAR GROUP LTD | 0.85 | 0 | $238.1M |
| HGL | HUDSON INVESTMENT GROUP | 0.505 | -2 | $30.0M |
| SSL | SIETEL LTD | 6.8 | -6 | $54.5M |
| DVN | DEVINE LTD | 0.14 | -7 | $23.0M |
| VOL | VICTORY OFFICES LTD | 1.8 | -10 | $73.4M |
| VTH | VITALHARVEST FREEHOLD TRUST | 0.77 | -14 | $142.5M |
| AU1 | AGENCY GROUP AUSTRALIA LTD | 0.061 | -20 | $18.2M |
| BHL | BOYUAN HOLDINGS LTD | 0.13 | -24 | $44.6M |
| TIA | TIAN AN AUSTRALIA LTD | 0.33 | -27 | $28.6M |
| UUL | ULTIMA UNITED LTD | 0.016 | -30 | $469K |
| URF | US MASTERS RESIDENTIAL PROPE | 0.57 | -32 | $227.8M |
| LHB | LIONHUB GROUP LTD | 0.003 | -40 | $2.5M |
The top performer is Eureka Group (ASX:EGH) which builds rental accomodation for seniors and disabled pensioners. It is up 53 per cent in six months.
Second is real estate agent McGrath (ASX:MEA), which has gained 49 per cent.
Taking out bronze is property development and investment firm Axiom Properties (ASX:AXI).
However there are a few notable laggards including 2019’s only real estate IPO, serviced offices provider Victory Offices (ASX:VOL), which is down 10 per cent.
READ MORE: So the Morrison government won. What now for real estate small caps?
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