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.
Man who said buy Kogan shares at $3.63 says buy these 3 ASX stocks now
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In this FREE STOCK REPORT, Scott just revealed what he believes are the 3 ASX stocks for the post COVID world that investors should buy right now while they still can. These stocks are trading at dirt-cheap prices and Scott thinks these could really go gangbusters as we move into ‘the new normal’.
*Returns as of 6/8/2020
Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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