A swell in new housing loans, combined with rising house prices, point to building momentum in the economic recovery. Accordingly, several ASX shares with exposure to residential housing have already shown signs of increased sales volumes. Moreover, investors will be waiting to see if this will be further fueled by the actions of the Reserve Bank of Australia today.
Australia and New Zealand Banking Group Ltd (ASX: ANZ) chief economist, Paul Bloxham said.
We've got very low levels of COVID-19 and a reopening economy is a clear sign things are picking up. There's rising consumer sentiment and a pick-up in timely indicators for the housing market.
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Positive momentum in jobs
Yesterday, the ANZ job ads report showed a 9.4% increase month on month. ANZ senior economist, Catherine Birch, noted that the recovery in job ads had maintained a steady pace into October, having regained three quarters of the decline that occurred in April due to the pandemic. She went on to point out that job ads will need to exceed pre-pandemic levels to ensure jobs recovery.
SEEK Limited (ASX: SEK) data shows its job ads are already above pre-pandemic levels in some states and the Northern Territory, but there is some way to go in the ACT, New South Wales and Victoria. So far, more than 450,000 jobs have been added to the economy in the past four months. This is likely to be boosted further as Melbourne reopens in November.
In its annual report yesterday, Westpac Banking Corp (ASX: WBC) noted that 66% of customers on deferrals are returning to repayments. This has reduced the ASX share's peak home loans on deferral from $54.7 billion to $16.6 billion in October. Meanwhile, ANZ said last week that 79% of its customers were back on full repayments.
Housing price improvement
Consumers committed to home loans at the fastest rate in 3½ years in September, according to The Australian Financial Review. In fact, CoreLogic data released last Sunday shows there were 604 auctions in Melbourne that week, up from 490 a week earlier and 255 this time last year.
Australian Bureau of Statistics (ABS) figures show that new home loans rose 5.9% from August. This is now the fourth straight month of new home loan increases and the highest monthly total since March 2017.
BIS Oxford Economics economist, Maree Kilroy, said.
Existing home demand continues to grow with no signs yet of momentum abating despite the clear headwinds facing the economy…For new dwellings, the [federal government's] HomeBuilder program along with state level incentives are providing a considerable boost, which should continue in the December quarter.
ASX shares with residential exposure
During the first quarter of FY21, the two ASX shares below had considerable exposure to residential housing. In addition, both showed a significant sea change in relation to housing demand.
In the Stockland Corporation Ltd (ASX: SGP) 1QFY21 presentation, the company showed net quarterly sales of 1,799 residential houses. This is the highest level of sales the company has had for three years. These record sales through June and July moderated somewhat in August, although still maintained levels above historical averages. As a result, this ASX share is focused on restocking to take advantage of surging demand.
At Mirvac Group (ASX: MGR), Q1 leads were up by 34% and exchanges up 40% compared to the previous quarter and were above pre-COVID-19 volumes. This was due largely to projects benefitting from government stimulus as well as apartment projects in Western Australia and Queensland.
