Unlike China, where over construction and oversupply in housing is a major issue, Australia has a shortage in housing. Inflated property prices have kept many would-be buyers out of the property market due to the lack of affordability.
A new prime minister is in the office to tackle the slowing Australian economy. Providing incentives to the home building industry could be one option to prevent the economic slowdown.
Housing construction is big business. Lots are immediately snapped before you know it when a new land release is announced. A similar situation is occurring with new apartment buildings, with a mix of local and foreign investors' waste no time in grabbing many of the apartments.
The long term trend is a demand for more houses as the population grows. Here are five quality stocks linked to the housing sector that will likely benefit in the future.
Reece Australia Limited (ASX: REH) – Reece is a supplier of plumbing and bathroom products, with 450 stores across Australia. Strong building activity in financial year 2015 helped Reece exceed $2 billion in sales for the first time ever. The management at Reece expects the building momentum to continue next year.
Brickworks Limited (ASX: BKW) – is a leading supplier of bricks, pavers, roofing tiles for the home building industry. Brickworks Limited has under its umbrella some of the best building products brands in the industry. The Austral bricks division delivered a 40.5% increase in earnings for the twelve months ended 31st July, 2015. The management at Brickworks remains bullish on building construction outlook.
Boral Limited (ASX: BLD) – Boral is Australia's largest building material supplier. Strong demand from housing construction and new infrastructure products is likely to keep strong sales growth. Boral has a presence in the U.S. market, where it supplies building material. Recent improvements in the U.S. housing market has led Moody's investors service to upgrade Boral's rating.
CSR Limited (ASX: CSR) – is another major Australian residential and commercial building products supplier. CSR reported a 32% increase in net profit after tax to $92.4 million for the half year ended 30 September, 2015. The lift in half year profit was mainly due to strong demand for building products.
Fantastic Holdings Limited (ASX: FAN) – A smaller furniture retailer. Fantastic has been making all the right moves by selling underperforming businesses, opening new stores and improving product ranges. Sales increased by 11% for the last financial year.
Foolish takeaway
A slowdown in the Australian economy is a worry the policymakers face even as low-interest rates and a falling Australian dollar are helping the economy. However, building and construction sector has the potential to revive the economy if they are offered the right incentives. Foolish investors may want to add these stocks linked to housing construction to their watch list.
