Like many ASX property shares, the Lendlease Group (ASX: LLC) share price was hammered during the initial COVID-19-driven market rout. The property developer's shares plummeted 51% from 21 February through to 27 March.
Following those lows, the Lendlease share price has regained 51% since 27 March. At first blush you might think that a 51% recovery following a 51% loss means shares have regained their 21 February highs. But remember, if a share loses 50% of its price it needs to go up 100% to recoup the losses.
Hence the Lendlease share price remains down 26% since 21 February. By comparison, the S&P/ASX 200 Index (ASX: XJO) is down 7% since that same date.
However, if Citi's outlook for residential property prices in today's ultra-cheap money environment proves correct, could Lendlease shareholders be major beneficiaries?
We'll get to that in a tick. But first…
What does Lendlease do?
Lendlease Group develops and owns international property and infrastructure projects. Its operations span across Australia, Asia, the Americas and Europe. The company's integrated business model comprises development, construction, investment management and ownership of property and infrastructure assets.
The company is active in the residential, retail and commercial office market spaces.
Why is Citi's outlook for credit growth important?
According to the Australian Financial Review, Citi believes the forecast for credit growth and bank earnings don't fully take into account the potential for a big surge in residential real estate prices in today's easy money environment.
Citi's Brendan Sproules and Thomas Strong said:
The RBA's almost singular focus on the currency will lead to the inevitability of what always happens when rates fall – asset prices go up. Particularly housing. Certainly, the AFR's Banking Summit gave credence to this view, with a broad acknowledgement that housing would accelerate.
Residential real estate makes up a significant share of the Lendlease portfolio. As the company notes, it "shapes cities, creating strong and connected communities".
In the early months of the pandemic, house prices in Australia were widely forecast to fall into 2021. Atop the impact on the retail sector, this put a lot of pressure on the Lendlease share price.
But if house prices now look to spike higher, as Citi highlights, the pressure on the Lendlease share price could potentially lift.
