3 ASX shares to buy for the real estate explosion

Australian property prices are running hot. This is how you can get a piece of the action through ASX shares.

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Australian real estate prices are skyrocketing, thanks to near-zero interest rates and record household savings built up from the COVID-19 downturn.

Residential housing, especially, is soaring at a speed not seen since the late 1980s.

But if you're an ASX investor, how do you take advantage of this?

Shaw and Partners portfolio manager James Gerrish last week picked out 3 ASX shares involved in the property market that he sees bright prospects for.

This is what he told his Market Matters (MM) newsletter subscribers:

A man holds up his hand with 3 fingers up

Image source: Getty Images

DEXUS Property Group (ASX: DXS)

Dexus owns and rents out commercial real estate, which obviously took a heavy hit when many Australians started working from home last year.

While there's uncertainty about what demand for office space will be like in the post-COVID world, Gerrish believes this anxiety is already priced in.

"DXS is trading at a 12% discount to the value of its underlying assets versus an average 8% premium," he told his subscribers.

"Couple this with a 5.5% projected yield over the coming 12 months and it's easy to see why we added it to the MM income portfolio last month."

The stock is currently trading at $10.09, with Gerrish backing it to break $11.

"MM believes that office demand will taper — but not by the magnitude that many think — and there is a natural offset through growth in employment," he said.

"For most businesses, the office will remain the primary place of work, of course with more flexibility around the edges."

Goodman Group (ASX: GMG)

A giant of the industrial real estate space, Goodman Group has been a major beneficiary of Australia's shift to online shopping.

"Goodman is now the largest property company on the ASX with a market capitalisation of around $34 billion — about the same size as Afterpay Ltd (ASX: APT)!" said Gerrish.

The company enjoys a supplier relationship with e-commerce behemoth Amazon.com Inc (NASDAQ: AMZN), providing warehouse space for its Australian operations.

"They are currently building Amazon's first Australian robotics fulfilment centre in western Sydney — a building the size of 22 football fields manned by around 2,000 robots," Gerrish told his subscribers.

Unlike many other ASX real estate shares, Goodman does not provide a massive yield. But Gerrish likes its growth prospects.

"MM is bullish GMG targeting a move above $20."

Goodman shares are currently trading at $18.65.

National Storage REIT (ASX: NSR)

This real estate investment trust is a landlord to a network of about 200 self-storage locations around the country.

Gerrish explained that just over a year ago, there was a 3-way battle to acquire National Storage. Two bidders offered $2.20 per share and a third bid $2.40.

"The deal looked like getting done, however along came COVID and the extreme market volatility saw the bid pulled," he said.

"Now there's talk of a revitalised bid and private equity firm Blackstone is also being thrown into the mix."

The National Storage share price is currently trading at $2.17, offering a 3.41% yield.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Tony Yoo owns shares of AFTERPAY T FPO and Amazon. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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