The ASX share market may have been surprised yesterday by the RBA's decision to leave the official cash rate where it was at 3.85%.
I was surprised too, but the commentary from the RBA suggested that the central bank just wanted to see evidence that inflation remains within its target range of between 2% to 3%. The next RBA meeting is scheduled to finish on 12 August 2025, so I'm expecting a rate cut then if the inflation picture remains supportive.
However, some rate-sensitive businesses did fall yesterday after that RBA decision. I still think the below ASX shares (among other opportunities) are fantastic ideas compared to other expensive areas of the market, with the ongoing recovery only delayed by a few more weeks.
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Charter Hall Long WALE REIT (ASX: CLW)
Real estate investment trusts (REITs) struggled during the period of peak interest rates – that hurt rental profits and was a headwind for property valuations.
The most diversified REIT on the ASX is Charter Hall Long WALE REIT, in my view. It's invested across numerous areas including service stations, hotels/pubs, telecommunication exchanges, data centres, government-tenanted offices, warehouses and distribution centres, and so on.
What all of these properties have in common is that they are leased to high-quality tenants on long leases. At 31 December 2024, it had a weighted average lease expiry (WALE) of almost a decade.
With contracted annual rental increases, I think the business is primed to deliver pleasing total returns as the RBA reduces rates, particularly with its current distribution yield of 6%.
Scentre Group (ASX: SCG)
This business owns the Westfield shopping centres across Australia and New Zealand. There is limited sites across Australia's major cities for more stores, so I think the existing Westfields are very important assets that are able to attract every retailer worth their salt.
Not only could RBA rate cuts reduce the ASX share's debt costs and increase the value of the properties, but improving household budgets is likely to drive sales (consumer spending) at Westfield centres.
I think the Scentre share price could positively surprise in the medium-term.
Centuria Industrial REIT (ASX: CIP)
This is one of my preferred REITs because it owns a portfolio of quality industrial properties focused on Australia's cities.
It's benefiting from a number of positive tailwinds including Australia's growing population, increasing adoption of online shopping and growing demand for data centres.
If rate cuts are successful at revitalising the economy, then this could further increase demand for industrial space, where the vacancy rate is already low and rental growth over the last few years has been pleasing.
I believe the ASX share's distribution could be materially larger in five years, so I'd very happily invest today for the long-term.
