Australian Property Stocks Defying its Slump
The housing prices across Australia is falling faster than it did during the Global Financial crisis. The Australian Bureau of Statistics reported that across the nation, the prices fell by 2.4% in the quarter ending December and is expected to fall further by 5.1%. Prices of properties in two of the leading cities in Australia Sydney has dropped by 3.7%, and Melbourne saw a reduction of 2.4%. Apart from these two cities, Brisbane saw a reduction of 1.1%, Perth by 1%, Canberra by 0.2% and Darwin by 0.6%. Despite the fall in property prices, the stocks are doing great and have become immune to the slump. The property stocks have recorded its highest in three years.
How the big stocks are riding through rough weather?
The top three stocks that are doing well are the Goodman and Charter Hall, Mirvac Group and the REA group. Industry experts say that the rise is mainly due to diversification into different revenue streams. Moreover, there is also a great demand for office spaces which has helped the S&P/ASX 200 index to grow by 13% in 2019 and leading in the front are Goodman Group and Charter Hall Group. The Goodman and Charter Hall’s revenue is more from fund management and online shopping with its product listing in Amazon rather than rent. The other best stock is from the Mirvac Group which has made investments in office space and retail and has seen a jump in stocks by 21% this year. The other stocks that have done well are those that have invested in office spaces like the Dexus which is Australia’s leading office space provider and has seen a rise of 19% in office space demand.
Many stocks that have invested heavily in residential properties have seen a downturn among them Stockland which is into retirement and residential property development has reduced its targets for this year due to weak demand. Many analysts are cautious about this development as they see a risk in retail space. Rob Freeman, an analyst said ‘We see this as a value trap. This is because half the sector is retail malls and we believe the outlook has never been worse than it is today’.
The previous occasion when the property shares were high, the housing prices were high due to a reduction in housing loan rates by the Reserve Bank, now despite the same rates being in place, the demand is less.