The national housing market is more fractured than it has probably ever been. Sydney rents have recently endured their steepest decline, although this likely won’t last. Meanwhile, the Perth rental market is again booming. In fact, the number of homes and units for rent has fallen to the lowest figure since the peak of the resources boom in 2012. Moreover, the Real Estate Institute of WA has revealed a housing boom with properties selling in less than a fortnight despite the pandemic.
This is largely due to the number of West Australian expats who have returned home during the lockdowns. This is another area where WA differs from the rest of Australia. The very high mining content of its economy creates an international pull for WA business professionals across the world. Therefore the market was caught off guard when everyone came home at once and decided to stay.
Moreover, in the west, there is plenty of room, so people tend to want houses more than apartments. So the demand for properties to rent or buy is focused largely on detached or semi detached housing.
How big is the housing boom?
Despite all of the factors contributing to the WA housing boom, it is still a small market. I believe the boom is likely to have an impact on housing developers like Stockland Corporation Ltd (ASX: SGP), and Mirvac Group (ASX: MGR). However, these companies only have a portion of their portfolios in WA. Another housing company Ingenia Communities Group (ASX: INA) also holds a lot of rental stock in WA.
On the financial side, non-bank lender Resimac Group Ltd (ASX: RMC) has a corporate office in Perth. In addition, this company’s West Australian loan book stood at just under $1 billion in its FY20 annual report.
An effortless way to profit?
Peet Limited (ASX: PPC) develops properties nationally, but has 37.3% of its ongoing projects in Perth. Of all ASX shares, I believe Peet is probably the best positioned to capitalise on the WA housing boom. In addition, this small cap ASX share is also the largest, pure-play residential developer in Australia. The company had a difficult year due to COVID-19, yet still managed to increase sales by 43%. Along with a high 42% growth in the number of contracts in hand, the company also stands to gain from changes to lending laws.
In a sign of increased productivity, Peet has approximately 70% of its entire land bank currently in development. Moreover, there is a continued focus on overhead management and other operational efficiencies.
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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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