Boral, Brickworks, CSR set to benefit from Tasmania’s $30,000 building grant

The state government of Tasmania yesterday announced a doubling of the current first home builders grant to $30,000, which according to the Tasmanian Premier Ms Lara Giddings is in response to a slower than anticipated take-up of the current $15,000 grant.

Home building plays an essential role within an economy with the stimulus and flow-on benefits the spending provides creating a multiplier effect that ripples through an economy.

An assistance package such as that provided by the Tasmanian government will help builders, labourers and building material suppliers. Companies such as Boral (ASX: BLD), Brickworks (ASX: BKW) and CSR (ASX: CSR) — which manufacture cement, bricks, tiles, insulation, plasterboard and glass — are all early stage inputs into the process of home building, which makes the building material sector one of the first to benefit from any uptick in activity from a grant such as this.

Companies that provide fitting and fixtures and other later stage products and services to the home building process also stand to benefit. For example DuluxGroup (ASX: DLX), one of Australia’s leading suppliers of paint and coatings as well as garage doors and cabinet hardware, is a big beneficiary of the later stages of home building. Likewise GWA (ASX: GWA), which owns well-known bathroom fittings brands including Caroma and Dorf, is well leveraged to the fit-out stage of home building.

Finally, Tasmania’s home building grant helps businesses offering furnishing products and services. Companies that stand to benefit from increased demand for white goods and furniture include Fantastic Holdings (ASX: FAN), which has Fantastic Furniture stores in both Hobart and Launceston and Harvey Norman (ASX: HVN), which has a presence via seven locations throughout Tasmania.

Foolish takeaway

Many businesses and sectors are cyclical in nature and none more so than the building industry. The current upswing in building activity is off of a very low base and could have much further to run. This situation bodes well for increased revenues and earnings for building sector-exposed firms.

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Motley Fool contributor Tim McArthur owns shares in CSR.

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