It was another busy weekend of political announcements in Australia by both the Labor and Coalition. This time, both sides have announced plans to help first home buyers. I think there are a few ASX shares that could be in line to benefit.
I'm not going to think too hard about the political ramifications, but it seems both policies could help boost the construction of new houses.
According to reporting by the ABC, the Coalition has announced that first time buyers of newly built homes would be able to deduct mortgage payments from income taxes under a Coalition government. The ABC said it will be means-tested at $175,000 for singles and $250,000 for couples. Michael Sukkar told the ABC it would be:
…a massive structural change to our tax system to provide a huge tax concession to encourage first home buyers, to give them the firepower in the first place.
In Australia you only get a new house built if someone is prepared to commit. The way you unlock supply is encourage someone to pre-commit to a new dwelling.
Meanwhile, the ABC reported Labor have announced that Australian first home buyers will be able to purchase a house with a 5% deposit, avoiding lenders' mortgage insurance. Labor will also commit $10 billion to build 100,000 new homes exclusively for first homebuyers. Housing Minister Clare O'Neil said on ABC's Insiders:
Those first home buyers won't be competing with property investors or people of other generations.
The housing that is being built today is not affordable for most young people who are entering the market and that's the real problem. What we are doing is supplementing supply at the affordable end of the market and that's where it is really needed.
Which ASX shares could benefit?
The most obvious beneficiaries could be businesses involved with building new homes, though lenders and mortgage brokers could also benefit if it helps get more first-home buyers into houses. Credit growth would be helpful for their earnings.
There are three businesses I'm going to talk about. But, it's worth noting that first-home buyers aren't the dominant force in the industry, so I'm not expecting the follow company's earnings to double from these announcements. However, it could be materially helpful for their earnings.
Brickworks Ltd (ASX: BKW) has an Australian building products division. For starters, this ASX share is the largest brickmaker in Australia. It also makes pavers, masonry and stone, roofing, specialised building systems, cement and timber battens. I really like this company because of its impressive balance sheet which includes industrial properties and an investment division.
SGH Ltd (ASX: SGH) is a diversified industrial company that has a number of businesses, including ones focused on construction. It owns WesTrac (one of the largest Caterpillar deals globally), Coates (Australia's largest industrial and general equipment hire) and Boral (a construction materials and building products supplier).
Wesfarmers Ltd (ASX: WES) is the parent business of Bunnings Group, which is the biggest earnings generator for Wesfarmers. Bunnings Group includes warehouses, trade centres, Tool Kit Depot stores and Beaumont Tile stores.
I think each of these businesses, particularly Brickworks, could be long-term opportunities today.
