Property stocks might be back on the table following the Reserve Bank of Australia's (RBA's) latest interest rate decision, with a top broker tipping three real estate S&P/ASX 200 Index (ASX: XJO) shares as buys.
Citi analyst Suraj Nebhani points to the RBA's decision to pause rates at 3.6% in April, as well as data suggesting house prices are rising, saying courtesy of The Australian:
[It] raises questions whether we are nearing a bottom of the residential property market.
That's surely good news for those invested in the sector. The S&P/ASX 200 Real Estate Index (ASX: XRE) plunged nearly 24% last year amid what became 10 consecutive rate hikes – an effort to tame rampant inflation.
The sector has traded relatively flat so far in 2023, posting a slight 2% uptick over the last fortnight. Is this just the start of a notable recovery? Nebhani thinks so, continuing:
The impending mortgage cliff and lower borrowing capacity create some near-term uncertainty, but rising immigration along with low supply create a positive medium-term backdrop.
Let's take a look at the three recently-embattled ASX 200 property shares Citi rates as buys right now.
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3 buy rated ASX 200 property shares
Mirvac Group (ASX: MGR)
Citi has upgraded its outlook for Mirvac shares to a buy with a $2.40 price target – a potential 11% upside.
The property group saw its statutory profit fall 62% to $215 million in the first half of financial year 2023, mainly due to lower investment property revaluations.
The company's CEO and managing director Susan Lloyd-Hurwitz said high inflation and interest rates created uncertainty for consumers and put pressure on economic growth during the period.
Stockland Corporation Ltd (ASX: SGP)
Also now buy rated is property development giant Stockland – Citi tips its shares to rise 11.5% to trade at $4.60.
The company's commercial property leg delivered just $30 million of revaluation gains in the first half – down from $543 million in the previous period. That saw its half-year statutory profit tumble nearly 65% to $301 million.
Ingenia Communities Group (ASX: INA)
Finally, Citi recently initiated coverage of lifestyle communities developer and operator Ingenia Communities – slapping its shares with a buy rating and a $4.40 price target. That represents a potential 12.6% upside.
The softening residential real estate market, along with construction delays, dinted the company's earnings last half. Its statutory profit fell 16% to $33.7 million in the period.
