The Australian property market could be poised for a strong recovery in 2020 as challenges facing the sector start to ease. The turnaround could be boosted by low interest rates and more relaxed credit lending following the royal commission into the financial sector. In addition, the federal government’s First Home Loan Deposit Scheme could fuel more buyers entering the market.
Here are 3 stocks on the ASX that could help you profit from a recovery in the Australian property market.
James Hardie Industries (ASX: JHX)
The James Hardie share price has already had a descent run, nearly doubling in 2019. The company is heavily exposed to a booming United States (US) market, with around 75% of its earnings come from the US. According to some analysts, increased building activity in the US has not been factored in.
A potentially weaker US dollar and sustained low interest rates has the company well-poised to deliver on growth in the short term. In addition, the company’s new CEO has implemented cost reduction strategies that could see James Hardie outperform in 2020.
Brickworks Ltd (ASX: BKW)
Brickworks is forecasting flat earnings until FY22, however lower interest rates and an increase in building activity could see the company’s outlook and profit grow. Contraction in the US brick industry could provide acquisition opportunities for the company to strengthen its market share.
Lendlease Group (ASX: LLC)
Despite a surprise downgrade in November 2018, the Lendlease share price performed strongly in 2019. The downgrade resulted from issues with the company’s engineering segment and Sydney’s NorthConnex tunnel. An exit from the engineering sector and strong residential housing market could see the Lendlease share price surge even further in 2020.
Lendlease recently set a new Australian space record of $100,000 per square metre following the $140 million sale of a new apartment in Sydney’s Barangaroo. The company is also looking to expand operations into affordable housing developments in Australia once governments parcel new sites.
Rising auction clearance rates in late 2019 could reflect further upside for the Australian property market in 2020. Aside from companies that could profit directly from increased building, investors should also look out for auxiliary companies that provide raw materials such as bricks and plumbing.
It is also important to keep in mind that the sharemarket usually prices information into stock prices for the next 9 months ahead. Investors should take this into account before buying shares and also manage their risk appropriately if the property market fails to boom.
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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Brickworks. 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.