The residential property market is starting to head downwards, which is bad news for property owners with large debt balances hanging over their heads. In the short to medium term I think house prices could head steadily down as the various factors which helped property prices grow turn into headwinds. At the moment, population growth is the only thing going for property prices. However, property is a huge part of the Australian economy and I can understand why any investor would want a piece of the ‘safe as houses’ pie. Here are three businesses that could give you good property…
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The residential property market is starting to head downwards, which is bad news for property owners with large debt balances hanging over their heads.
In the short to medium term I think house prices could head steadily down as the various factors which helped property prices grow turn into headwinds. At the moment, population growth is the only thing going for property prices.
However, property is a huge part of the Australian economy and I can understand why any investor would want a piece of the ‘safe as houses’ pie.
Here are three businesses that could give you good property exposure:
REA Group Limited (ASX: REA)
REA Group is the owner of Australia’s leading property website, realestate.com.au. It generates large amount of traffic as both buyers and sellers are looking to get the best deal.
Management have been smart with how they have maximised the revenue per ad with featured properties and premium properties.
The value proposition of advertising on the site is compelling, the advertisement cost is a small portion of the advertising budget, yet it’s integral to advertise on the leading site or else that could cost thousands from the potential selling price. It could keep increasing prices at a good rate.
REA Group also has a number of promising investments overseas in South East Asia, India and the USA.
REA Group is currently trading at 38x FY18’s estimated earnings.
Domain Holdings Australia Limited (ASX: DHG)
Some investors may not like that REA Group has made overseas acquisitions and wants an Australian-focused property business. Domain could be the right choice for that investor’s preference.
Domain runs the second most active property site and has also experienced large growth from consumer preferences changing to online research. Domain boasts of having the most popular property app, which is where more of our time is being spent.
It will be interesting to see how well Domain reports next month.
DuluxGroup Limited (ASX: DLX)
DuluxGroup is the owner of several leading Australian home improvement brands. Some of its famous names include Dulux, British Paints, Cabot’s, Selleys and Yates.
I like DuluxGroup because it has quite defensive earnings due to how inexpensive its products are and how likely it is that people will continue to carry out small renovations like painting a room, even in a recession.
DuluxGroup is currently trading at 19x FY18’s estimated earnings.
I’m interested in buying shares of all three companies, though a good opportunity hasn’t presented itself yet. REA Group is a very good business but it’s trading quite expensively. If I had to buy one share I would choose DuluxGroup due to its defensive nature, good dividend yield and steady growth.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.