House prices appear to have reached their bottom given two consecutive months of rises in the median Australian home value, according to independent data provider CoreLogic.
CoreLogic's national Home Value Index (HVI) increased by 0.5% in April and 0.6% in March.
CoreLogic's research director Tim Lawless says:
Not only are we seeing housing values stabilising or rising across most areas of the country, a number of other indicators are confirming the positive shift.
Auction clearance rates are holding slightly above the long run average, sentiment has lifted and home sales are trending around the previous five-year average.
So what does this mean for ASX 200 building shares? Only good things, according to one expert.
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What do rising house prices mean for ASX 200 shares?
Rising house prices are always positive for ASX 200 real estate shares such as property developers, real estate investment trusts (REITs), and other companies associated with the property sector.
These include building companies, building materials suppliers, and household furniture and appliance retailers.
Over the coming months, Jun Bei Liu of Tribeca Investment Partners expects ASX 200 building shares to benefit from higher home buyer demand and sales now that house prices appear to have bottomed.
As reported by The Sydney Morning Herald, Liu says:
The likes of Boral Limited (ASX: BLD), Stockland Corporation Ltd (ASX: SGP), and Mirvac Group (ASX: MGR) are going to see quite a bit of demand. It doesn't mean earnings will return quickly, but the share price will move ahead of earnings for those builders.
Liu also singled out CSR Limited (ASX: CSR) shares to benefit from rising house prices and activity, too.
The CSR share price is already up 18% in the year to date. The Boral share price is up 40%, the Stockland share price is up 24%, and Mirvac shares are up 10%.
The share prices of other major ASX 200 building shares like James Hardie plc (ASX: JHX) and Brickworks Limited (ASX: BKW) are also up by 30% and 14% respectively.
As we previously reported, many brokers reckon James Hardie shares, in particular, were oversold in 2022.
Boral, CSR, Brickworks, and James Hardie are all ASX 200 materials shares. Stockland and Mirvac are diversified property development companies.
Liu points out that rising house prices have far-reaching benefits for the broader economy.
She says:
Ultimately, house prices rising is very good for the Australian economy because it's such a big component that underpins consumer confidence, business confidence, and economic activity, and flows through to salaries, employment, and everything else. Most things will benefit from it.
Building activity in Australia has declined significantly over the past year due to rising interest rates, supply chain disruptions, and labour shortages in the construction sector.
