What's heating up the Australian property market? Three ASX stocks to look at

Summary

  • Australian property prices are expected to grow significantly in the next two years, with ANZ anticipating strong growth in 2021 across different regions in Australia before a relatively lower but still considerable growth in 2022.
  • Banking players, including ANZ and Commonwealth Bank, have revised their property price growth for 2021.
  • Dexus settled on the sale of 10 Eagle Street, Brisbane, for AU$285 million, while Cromwell purchased 545 Queen Street, Brisbane, for AU$117.5 million.
  • PEXA’s IPO is expected to complete by June 2021 end.

According to recent estimates, real estate prices have seen a considerable surge in Australia and the trend is likely to continue for the next couple of years.

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S&P/ASX 200 Real Estate index bounced back strongly after experiencing a significant drop from January 2021 till 22 February 2021. After reaching the lowest level of 3056.70, the index bounced back and settled at 3407 on 01 June 2021.

Do READ: ASX 200 today: What’s keeping shares down ahead of RBA policy meet?

In a recent announcement by the Australia Bureau of Statistics, there was a 5.5% growth in the new loan commitments for housing, 2.1% for personal fixed-term loans and 6.7% for business construction. The rise in loan commitments indicates an increase in demand for homes that are likely to steer the property prices north.

GOOD READ: Needle on Australia’s Property Market

Source: Kalkine Media (Data Source: ABS)

In March 2021 (seasonally adjusted terms), new loan commitments for housing increased by 5.5%, reaching a record high of AU$30.2 billion. Lending to investors contributed over 50% of the growth in housing loan commitments. The value of new loan commitments for investor housing improved by 12.7% to AU$7.8 billion during March 2021 (up 54.3% compared to March 2020).

According to Katherine Keenan, the head of Finance and Wealth at ABS:

The value of owner occupier loan commitments for new dwellings construction fell by 14.5%. This was the first drop following the introduction of the HomeBuilder grant in June 2020.

Source: Kalkine Media (Data Source: ABS)

Outlook of the Australian Property market in 2021 and beyond?

According to a recent report by ANZ Bank, the housing prices at a regional level would increase by 17% in 2021 before slowing to a still-notable 6% next year. ANZ predicts that by 2021 end, property prices in Sydney would increase by up to 19%, Melbourne prices by 16%, Brisbane prices by 16%, Adelaide by over 13%, Perth by 19%, Canberra by more than 16%, and Darwin by more than 16%.

In addition to ANZ, Commonwealth Bank also revised its property price growth for 2021 from 8% to 10%.

DO READ: Where is Australia’s Property Sector Heading?

The Reserve Bank of Australia (RBA) predicts that housing prices would witness a cumulative growth of 25% by the end of 2023 (8% in 2021, 9% in 2022 and 8% in 2023). Christopher Joye from Coolabah Capital Investments also projects significant growth in property prices as well as real residential investment.

INTERESTING READ: Will Federal Budget Add More Firepower To Australia’s Property Sector?

Latest updates from a couple of ASX-listed property stocks

Some of the key Australian players operating in the real estate space include Dexus (ASX:DXS), Cromwell Property Group (ASX:CMW), and Australian Unity Office Fund (ASX:AOF).

On 31 May 2021, Dexus announced that it had settled on the sale of 10 Eagle Street, Brisbane, for AU$285 million. The property was held by the Dexus Office Partnership, in which DXS owns a 50% interest.

On 06 May 2021, Cromwell Property Group purchased 545 Queen Street, Brisbane, for AU$117.5 million on behalf of unitholders in the Cromwell Direct Property Fund.

PEXA’s IPO

On 27 May, Link Administration Holdings Limited (ASX:LNK) confirmed that it received an offer from Kohlberg Kravis Roberts & Co. L.P. to sell Link Group’s 44.18% share of PEXA. The proposal denotes an enterprise value for 100% of PEXA at AU$3 billion along with a cash balance of AU$126 million on the balance sheet as of 31 March 2021.

On 31 May, PEXA confirmed that post a cornerstone bookbuild process, it signed an underwriting deal for the proposed IPO of PEXA. The underwritten price of the IPO indicates an enterprise value of AU$3.3 billion for PEXA. The planned IPO would be listed towards the end of June 2021.

DO WATCH: The Buzzing Trends | PEXA to launch Australia’s biggest IPO of 2021, aims to raise AU$1.18 Billion

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