During the reporting season, investors concentrated on the rising stock market, but the growing housing market shouldn't be ignored. Home prices and sales volumes are growing, which is boosting the earnings of a number of big-name stocks like the ones below.
During the winter quarter, values in Melbourne and Sydney were up about 6% and 5% respectively, according to housing market researcher RP Data. Over time, the rise in values will spread to other capital cities like Adelaide and Brisbane, but all the while stocks related to housing could see more business revenue.
Here are three stocks that investors should be following to gauge the growth.
— Macquarie Group Ltd (ASX: MQG)
The investment bank wants to take more market share in the residential mortgage space because it sees the growing potential of a rising housing market. With lower interest rates, lenders make less on average, yet if house prices are rising at a fair clip, more revenue can be made with higher volumes of home loans. It is teaming up with mortgage broker networks like Yellow Brick Road Holdings Ltd (ASX: YBR) to increase the number of borrowers it can engage with.
The stock has a 15 PE, which is historically high for the company. Still, it offers a big 4.8% dividend yield partially franked.
— Harvey Norman Holdings Limited (ASX: HVN)
The electronics and home furnishings retailer surprised the market with its full year underlying net profit booming 20% up from new store sales and stronger revenues in its overseas segments. Harvey Norman benefits as the housing market grows, with home owners on average buying more replacement furniture and electrical goods, especially for newly constructed homes. The company is also opening stores at a slower rate so that it can improve margins and focus on existing store performance. Same-store sales in Australia were a little weaker in the fourth quarter than the third.
At a 17 PE, the stock has hit a 52-week high at $3.74 this week. Its yield is 3.4% fully franked.
— Stockland Corporation Ltd (ASX: SGP)
The housing market has lifted the commercial and residential property developer's housing construction order books. Its main production is in houses, but it is accelerating its expansion into unit development to take advantage of the growing demand for urban living near CBD areas amongst younger buyers and investors. Residential business earnings were up greatly in FY 2014 with over 5,000 lot settlements and it has a record number of 3,185 lot contracts in hand to start off FY 2015. As property prices rise, buyers look for new units in the city since houses are very expensive.
The stock has a PE of 17 and a healthy yield of 5.7% unfranked. It set a 52-week high of $4.20 this week.
