The Commonwealth Bank of Australia (ASX: CBA) recently reviewed its forecast for house prices. Instead of the potential for up to 30% falls in residential house prices, the bank believes there will be a recovery in the second half of 2021. This means that ASX shares which have been sold down, are likely to see renewed interest over the next 6 months. I think this is pretty exciting and gives investors a chance to be in on the ground floor as prices rise.
Interestingly, CommBank has an empirical track record for accuracy.
ASX shares for communities
Stockland Corporation Ltd (ASX: SGP) is the glaring choice for best value ASX share in residential real estate. With a market cap of $8.6 billion, Stockland has a development pipeline of 76,000 lots of residential real estate. The company estimates this has an end market value of $21.4 billion.
Only 52% of these lots have been settled. However, the company has reported a level of pent up demand. Moreover, it has reported that since mid-May, residential real estate demand has recovered to above pre-COVID levels.
At the time of writing Stockland has a price to earnings ratio (P/E) of 13.14. It also has a trailing 12 month (TTM) dividend yield of 6.6%. The company is still down in year to date trading by 21.6%. Its share price has remained depressed due to the uncertainty in the housing market. I think this is a great entry point for this ASX share.
Residential houses and apartments
Another ASX share, Mirvac Group (ASX: MGR) has an an estimated value of $18.8 billion of residential real estate in progress, with a further $2 billion planned. According to the company’s H1 Analyst toolkit, it has only settled 37% of these houses. As with Stockland, the company posted disappointing FY20 results, including a drop in net profit after tax of 45%. However, this is to be expected considering most of the country was in lockdown from March to May, and into June.
Right now, Mirvac is selling at a P/E of 14.52, with a TTM dividend yield of 4.42%. This is another well-managed company that has been oversold on uncertainty, with a window of opportunity ahead of it.
Both Stockland and Mirvac are great large cap ASX shares with a track record of delivering results. Stockland in particular is selling at a cheaper price, as compared to earnings, than it has done for the past 5 years. In addition, both pay solid dividends and have an existing pipeline of work ready to sell as conditions improve.