The share market and property market are often seen as two completely different asset classes. However, real estate investment trusts (REITs) and banks are a good way to get exposure to property without actually owning one yourself.
There are also businesses that are heavily related to the property market, these businesses are also good opportunities. Here are three of them:
Reece Ltd (ASX: REH)
Reece is the bathroom and plumbing giant of Australia with a market capitalisation of over $4 billion.
It has carved out its niche in the real estate retail market. Being the largest plumbing business means it can offer low prices whilst still having high margins.
Bathrooms will always need constructing, replacing or repairing, which is why I think Reece could be a decent buy.
It's currently trading at 22x FY18's estimated earnings with a grossed-up dividend yield of 3.2%.
REA Group Limited (ASX: REA)
REA Group is the owner of Australian property sites realestate.com.au, realcommercial.com.au and flatmates.com.au. It also has stakes in property sites in South East Asia, India, and the USA.
The business has powerful pricing abilities because it's the most popular site, attracting the most buyers and sellers. This allows it to raise prices every few years at a high rate.
REA Group is the best way to get exposure to the property boom in my opinion. It's currently trading at 32x FY18's estimated earnings with a grossed-up dividend yield of 1.93%.
DuluxGroup Limited (ASX: DLX)
DuluxGroup is the home improvement brands giant of Australia. Warren Buffett is a big fan of brand power and this business has a lot of great brands including Dulux, British Paints, Cabot's, Yates and Selleys.
The business is a slow and steady grower with single-digit revenue growth and low double-digit profit growth each year.
Its improving economies of scale are increasing profit margins. I think it's one of the better blue chips on the ASX.
DuluxGroup is trading at 18x FY18's estimated earnings with a grossed-up dividend yield of 5.4%.
Foolish takeaway
I'd put all three companies in the 'good basket' of ASX shares. At the current prices, I think REA Group is a bit too expensive in the short-term. However, DuluxGroup looks like good value and its dividend yield is a juicy bonus.
