Despite all of the challenges in the property market over the last couple of years, including inflation, increased interest rates, and tightening of bank lending, it’s surprising that CoreLogic’s recent data shows consistent growth in residential property over the last 14 months.
Interest rates are likely to fall later this year, and with insufficient property to house the population, property prices are expected to surge over the next few years. Given this, I want to highlight three property stocks I believe have the potential to provide fantastic growth in the future.
The industrial property market is doing very well. According to the Australian Financial Review, it is now worth $300 billion and is forecast to reach $400 billion in the next 10 years. It’s no wonder the real estate sector index has risen over 40 per cent since November last year. The good news is that property prices are expected to continue rising, given the housing shortage and the potential decline in interest rates later this year.
One of the best real estate companies right now is Lendlease Group (ASX:LLC), whose share price has fallen 70 per cent since August 2018. The share price is currently around $7, which is its historical fair value level, so the signs are good. The company has plans to deleverage in the second half of FY24, which might be the catalyst for the price to rise. There is a potential upside of over 150 per cent, although I think it’s still too early to pull the trigger but I would be watching this one like a hawk.
Dexus (ASX:DXS) is another household name. It has strong fundamentals and maintains a solid capital position, which means good things if property prices rise. The price of Dexus is currently trading around 50 per cent of its all-time high, which would be attractive to the value investor. If the stock can continue to hold above $7, it will likely begin a new growth phase.
If you’ve bought or sold a house recently, it’s likely you paid your Pexa fee. The company facilitates property transactions, and while it’s a fairly new company that was listed in July 2021, it provides huge potential, given its current share price is near its all-time low. As with most stocks that are newly listed, it’s quite normal for the price to decline after listing; however, given the share price has experienced the longest consecutive rise in recent history, now is a good time to take a serious look at this stock for potential buying opportunities.
Best and worst-performing sectors this week
The best-performing sectors include Utilities and Energy up over one per cent, followed by Materials up over half a per cent. The worst-performing sectors include Real Estate and Information Technology, down over three per cent, followed by Consumer Discretionary down over two per cent.
The best-performing stocks in the ASX top 100 include Alumina (ASX: AWC), up over eight per cent, followed by Evolution mining (ASX: EVN), up over six per cent and South 32 (ASX:S32), up over five per cent. The worst-performing stocks include Orora Limited (ASX:ORA), down over 16 per cent, followed by Block Inc (ASX:SQ2), down over eight per cent and Xero (ASX:XRO), down over six per cent.
What’s next for the Australian stock market?
Last week, I mentioned we should expect volatility in April and boy, what a start we have had so far. On Wednesday, the market fell over one and a half per cent, with the sellers wiping away all last week’s gains in one day. It’s very common that some of the most significant one-day falls occur during times when markets are rising strongly. However, I have no reason to ring the alarm bells as the All Ordinaries index is still trending upward uniformly from last October’s low.
Another reason I am bullish on our market in April is that historically, this month provides the best returns of any month in the year, with the average return being 2.63 per cent. Given this, I anticipate the market will move up for the rest of this month before peaking in late April and turning down in May.
That said, I don’t control the market, and there is a chance it may head south a little earlier, which means you need to be careful when buying stocks, especially in the second half of the month. If the market begins falling earlier, I would encourage you to watch the 7,800 and 7,500 levels for potential support.
For now, good luck and good trading.
Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in bookstores and online at www.wealthwithin.com.au
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