Aussie property market still growing strongly
Despite all the fear and doubt, property prices continue to rise along the east coast of Australia. In certain places, the growth is over and beyond what even the optimists have expected. The impact of state government spending in places like NSW, Queensland and Victoria in addition to record low interest rates has seen investors continuing to support the domestic property market where the majority of Australian wealth is stored.
Property prices grew 2% over the June quarter across Australia’s capital cities, official data released on Tuesday shows, and more growth could be on the cards. Sydney and Melbourne property prices increased 2.8% and 2.7% respectively over the three months to June, followed by Canberra up 2.2 %, Australian Bureau of Statistics price results found. Brisbane grew 1.1% over the same period, while Perth property prices fell 1.2%.
This was Sydney’s strongest performance after two consecutive quarters of price falls in December and March.
This has implications for the Australian banks, building materials and other property related stocks. The bears have been proven wrong again and expectations are now starting to change across the investment community.
One of the key stocks we have been watching and writing about to Invast clients in recent months has been McGrath (MEA). We stayed away from the IPO but saw value when the stock dipped below $1 per share on the back of earnings disappointment. While many were calling it the end of McGrath and the imminent fall of the property market, the opposite has occurred.
McGrath has managed to ease concerns with a reasonably solid earnings report card, the balance sheet is clean and the underlying markets which it operates are rising in price. The stock is currently trading at an implied market cap of around $165m with EBITDA of $26m before any uplift from recent property market strength or accretive acquisitions.
Institutional investors like Argo Investments have started taking note, recently joining the share register as a substantial shareholder. We’ve published an updated trading note to Invast clients this week with suggestions around the trading strategy. Only clients get access to this high level research.
If you haven’t yet opened an account, you can self-navigate through our simplified account opening process here. Invast clients will get many more trading updates on resource stocks, in the led up to 2017, over the next few months.
Chief Market Analyst
Peter Esho is a member of Invast’s Investment Committee and Chief Market Analyst at Invast Financial Services in Australia. The Invast’s Investment Committee constructs professionally constructed global thematic portfolios of Direct Market Access (DMA) CFDs over highly liquid global shares and ETFs through its new PortfolioInvestor platform. Since 1960, the Invast Group has grown to become one of the largest and most successful global brokerage firms, offering state-of-the-art trading technology and unparalleled service catering to all levels of traders.
Invast Financial Services Pty Ltd (ABN 48 162 400 035) is regulated by the Australian Securities and Investments Commission and holds an AFS Licence 438283 which authorises it to carry on a financial services business in Australia.