Potential beneficiaries of housing stimulus

About the author:

Tom Sartor
Author name:
By Tom Sartor
Job title:
Senior Analyst
Date posted:
02 June 2020, 12:40 AM
Sectors Covered:
Resources, Metals

Stimulating construction and manufacturing would generate the largest positive spillover for the broader economy in the post-COVID recovery according to the ANU. Announcement of Federal stimulus in the form of new homeowner grants is widely expected this week.

This would combat a drop in new home sales and resi construction, and would support supply and affordability. It would support activity linked to ~1 million construction jobs, and indirectly support household wealth, consumer confidence, spending and therefore many other jobs and segments.

Traditionally the states have offered $5-10k grants only to first home buyers, but Federal grants may apply across the board. The dollar value of potential grants this week are understood to be at least $20k, while lobbyists are calling for $40-50k.

The actual figure is expected to be in between. The Rudd government tripled the first home buyer grant to $21k during the GFC. Separately, recommendations from the Federal Financial Relations report chaired by David Thodey are due to be made to the NSW and Victorian Governments this week.

The potential abolishing stamp duty (a barrier to home ownership), is expected to be a key theme.

News this week has potential to support the housing-facing sectors & companies

Construction / Building materials: New home building will benefit the materials suppliers, while alterations & additions will be more important for fixture wholesalers. However some stocks have already recovered to pre-COVID (alte February) levels, versus a materially weaker demand outlook.

Consumer Discretionary: Supportive housing conditions are correlated with consumer spending (general wealth effect and sentiment).

Banks: First home buyer (FHB) activity has been picking up over the last few weeks and additional stimulus should further boost activity. This should be positive for credit growth. From a banks’ asset quality perspective, the new homeowners grant would also be positive as it will provide support to the struggling construction industry.

Developers / REITS: Stimulus would be positive for sentiment and affordability – with stimulus usually directed towards new housing and first home owners. REITs exposed to any increase in consumer confidence, housing related spend may be beneficiaries due to improved sentiment.

Potential beneficiaries of news on housing stimulus

Materials

  • Brickworks
  • Wagners
  • ADBRI

Industrials

  • Reliance
  • GWA
  • Acrow Formwork
  • Bingo
  • Reece
  • Wesfarmers

Consumer

  • Beacon
  • Adairs
  • JB Hifi
  • Nick Scali
  • Harvey Norman
  • Temple & Webster

Developers/REITs

  • Sunland
  • Cedar Woods
  • Stockland
  • Aventus

More information

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Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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