Harvey Norman hopes for housing construction boom

Retailer Harvey Norman is poised to benefit from a pickup in housing construction.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Harvey Norman (ASX: HVN) executive chairman Gerry Harvey appeared on "Inside Business" over the weekend to discuss the company's prospects over the next 12 to 24 months.

Mr Harvey emphasised Harvey Norman's position as the retailer best positioned to benefit from a retail housing construction boom in the near term. The retailer sells nearly everything required to furnish a new house, from bedding and appliances to outdoor equipment and pool goods.

Mr Harvey was optimistic about the future of the housing industry, noting the apparent lack of dwellings in Australia to service the population. He favoured seeing more dwellings built instead of house prices rising dramatically, as the effects on the economy of increased construction will far outweigh the benefits of increased wealth of homeowners.

Increased house and apartment construction will flow through to all of the community, from parts manufacturers, builders, tradespeople, agents, the government and especially retailers. Mr Harvey was also optimistic about the effect that the mining sector will have on housing too. "I don't believe the mining boom is finished, so you've got the mining if not boom, big boom activity still strong up there and then you've got a housing industry recovery and together you've got an economy that has got reasonable growth prospects and when that happens you tend to keep your unemployment levels low".

Mr Harvey noted that rising property prices and construction should be a positive influence on consumer confidence as consumers become more wealthy through owning property: "There's every reason to believe they'll become more confident and if they do then they should buy more refrigerators and lounges and that sort of thing and they should renovate their houses and so you'll get more economic activity and that will be good for not just us as retailers but everyone out there".

While extolling the virtues of the positive effect the housing market could have on Harvey Norman, Mr Harvey was quick to criticize the government over Sunday penalty rates and the $1000 online GST threshold. Trading on Sundays is loss-making for Harvey Norman, noting that the right balance had to be found between rewarding workers and the ability of the company to make money. The online GST threshold does not affect Harvey Norman as much as others due to the large size of whitegoods and household electronics, but Mr Harvey once again noted that it was unfair for Australian retailers.

Foolish takeaway

Harvey Norman is undoubtedly in a good position to benefit from an increase in retail spending but competition from online retailers will continue to erode margins and stress profit growth. Housing construction is slowly ramping up, but investors should consider whether they believe shopping will continue to move online or if Australians will instead opt to head to shopping malls to purchase whitegoods and furniture.

Interested in our #1 dividend-paying stock? Discover The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

More reading

Motley Fool writer Andrew Mudie does not own shares in any of the companies mentioned.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »