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Why these 3 property-servicing businesses could be better than an investment property

A lot of Australians are property mad, they’re ‘as safe as houses’ after all. Property was great between 2012 and 2017, but it’s not looking so good now.

However, I can understand if people are still itching to get into the property market. There’s a lot of FOMO – fear of missing out. What if this property dip is short and it comes roaring back next year?

I don’t think that will be the case. However I do expect people will continue to pay for property-related services.

That’s why the following shares could be good investments:

Reece Ltd (ASX: REH)

Reece is Australia’s largest bathroom supplier business, but it’s also a major supplier of other piping materials like water mains and farmland irrigation. Australia is going through a residential and infrastructure construction boom, Reece is a good beneficiary of that.

It is also in the process of making a large US acquisition. The US region is growing at a much faster pace, so this could be a great move. Or it could flop, that’s the problem with big acquisitions.

DuluxGroup Limited (ASX: DLX)

DuluxGroup is one of Australia’s largest home improvement companies. It sells various brands like Dulux, British Paints, Yates, Selleys and Cabot’s.

Every weekend I’m sure there’s at least one person on my street who is using one of those brands to improve their home. They’re low cost renovations compared to installing a brand new kitchen, for example. Therefore, DuluxGroup may do better in a recession compared to most other consumer-facing companies.

DuluxGroup has proven to be a slow-and-steady performer for shareholders over the past five years.

REA Group Limited (ASX: REA)

REA Group makes a bit of profit on every property that is advertised on its market-leading website, realestate.com.au.

There are apparently more properties on the market at the moment, compared to recent history. Vendors may be willing to pay that bit extra for the best advertisement, which should translate to better long-term earnings for REA Group.

Being number one means REA Group attracts the most buyers, which attracts the most sellers and so on. This allows REA Group to implement strong price increases with little detrimental effect.

Foolish takeaway

All three businesses are high-quality and I’d be happy to have any of them in my portfolio. The problem for me is that none of them have been in my portfolio during their strong price rises! At the moment I’d only consider investing in DuluxGroup. REA Group’s valuation is too high for me and there is a higher risk with Reece until the acquisition is integrated.

For other shares that also have a great chance of beating an investment property’s returns, you should check out these exciting shares.

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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 Scott Phillips.

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