The next housing boom is coming. Australia's national median house price will rise by around 5% in 2013, the most since 2009 when the median price rose by a stunning 12.6%. Sydney, Perth and Hobart have been the standout performers this year, while Brisbane, Adelaide and Canberra have only increased marginally. Owners or prospective buyers are now looking ahead to what 2014 will hold. The overwhelming forecast from the articles this author has read is for 2014 to be another great year for property, especially in Perth, Queensland and potentially Sydney.
The Australian share market gives investors many options for exposure to increased building activity and home sales. The following four companies cover just about every part of the property market.
Boral (ASX: BLD)
Building materials provider Boral does more than many investors realize. Boral provides services for each phase of the building process including digging rocks out of the ground, and producing cement, bricks, roof tiles, windows, and timber and plasterboard products. Boral is up 5% this year, pays a 2.6% dividend, and is on a price to earnings ratio (P/E) of 27.
Stockland (ASX: SGP)
Developer Stockland generates around 35% of its earnings from Australian residential development. The company is expected to generate solid earnings growth over the next few years as development activity increases. 2015 and 2016 earnings are forecast to grow by 10% and 7% respectively. Stockland is up 5% this year, pays a 6.5% dividend yield and is on a P/E ratio of 16.
Harvey Norman (ASX: HVN)
Retailer Harvey Norman is well placed to benefit from a residential housing construction boom. The retailer is a one-stop shop for new homeowners looking to furnish their homes, and should benefit from new product releases such as the Playstation 4 and Xbox One. Harvey Norman is up 55% this year, pays a 3.2% dividend and is on a P/E ratio of 15.2.
Dulux (ASX: DLX)
Coatings producer Dulux is leveraged to a pickup in both new housing and maintenance/renovations. Dulux has a range of premium-brand paints, coatings, home improvement and gardening products that are sold through trade and retail channels. New housing accounts for 16% of sales, while two-thirds are from maintenance and home improvement. Dulux's earnings are almost recurring in nature as houses require a new coat of paint every few years and Dulux holds the majority of the Australian market. The recent pickup in building approvals bodes well for Dulux's earnings over the medium term. Dulux is up 43% this year, pays a dividend of 3.4% and is on a P/E ratio of 21.
Foolish takeaway
Investors should always consider how other investment markets might impact their share market returns. If the boom in housing construction materialises over the next two to three years, investors in listed Australian companies exposed to the housing industry should be rewarded through higher earnings and dividends.
