According to the Australian Bureau of Statistics monthly release, December monthly building approvals saw another fall compared to seasonally adjusted figures from November, continuing a decline since September's peak. This reduction was for both private sector houses and dwellings excluding houses, such as units.
On a yearly scale, the seasonally adjusted figures still show a strong uptrend. From December 2012 to December 2013, houses were up 17.8% and units were much further ahead at 29.3%.
Approvals surged in August and September, the spring months when property buyers naturally become more active, and in light of Sydney's home price rises, urgency was added to their house hunting. December is typically a slower time for real estate because businesses and consumers slow-down due to the approaching holiday season.
Stocks to watch
Property investors will know that building approvals are the forerunner of property sales. As a forward indicator showing a definite uptrend, building materials companies like Fletcher Building Limited (ASX: FBU), CSR Limited (ASX: CSR), Adelaide Brighton Ltd. (ASX: ABC) and Boral Limited (ASX: BLD) will benefit from the growing demand for new homes.
Over the past six months each of them have gone up in share price. The extended growth picture for housing construction is still not 100% clear, but market factors like low interest rates, increased consumer spending, and a stable economy (dented somewhat by the mining pullback) will provide incentive for further property purchase growth, spurring on construction as well.
|
Company Name |
PER |
Dividend Yield |
Price/ Book Value |
6-month share price change |
| Adelaide Brighton |
15.83 |
4.34% |
2.41 |
14% |
| Boral |
32.15 |
2.29% |
1.10 |
12% |
| CSR |
44.58 |
1.72% |
1.38 |
29% |
| Fletcher Building |
20.79 |
3.34% |
1.91 |
11% |
Internet service companies
Property related services, especially those online, will attract more viewers as home hunters scour the internet for bargains, prime real estate, and the next hot suburbs to buy into. Realestate.com.au, the real estate listings portal of REA Group Limited (ASX: REA), will undoubtedly draw even more site visitors, as well as receive more house listings, both of which can generate more revenue.
The domain.com.au listings portal, operated by Fairfax Media Limited (ASX: FXJ), couples its real estate listings with property research and data through its Australian Property Monitors service. Further to that it recently acquired Property Data Solutions, with its PriceFinder information service, to give viewers more information about property trends, suburbs and individual property data.
Foolish takeaway
The building materials industry is cyclical in nature, being linked with property trends, so investors always want to estimate where the industry is in its cycle to regulate their investments. Over the past two years, the property market has been turning up, so that would indicate the low part of the cycle has passed and the only question really is how far a typical property boom runs. The major listings portals grow with the property market expansion and their popularity strengthens their competitive advantage.
