Forget buying an investment property, grab this ASX share instead

Australia’s real estate obsession continues unabated, but there is a way to take advantage of that on the stock market.
The post Forget buying an investment property, grab this ASX share instead appeared first on The Motley Fool Australia. –

As share investors, no doubt you are well aware of Australia’s unhealthy obsession with real estate.

Property seems to be at a fever pitch especially right now, despite COVID-19 lockdowns affecting half the country’s population.

On the back of near-zero interest rates, Australia’s median house price has climbed to a new record of $955,927, according to Domain. 

That’s 5.8% growth in the last quarter and an eye-watering 18.8% for the past year. 

This ballooning of prices means rental yields have shrunk. Gross rental yields have tumbled to about 4%.

So what does this have to do with ASX shares?

The ASX share that takes advantage of the real estate fervour

According to Montgomery Investments chief investment officer Roger Montgomery, there is a quality stock one can buy to leverage Australia’s disproportionate appetite for real estate.

REA Group Limited (ASX: REA) is a super-high-quality business that has been growing revenues for years, despite declining listings,” he wrote on the Montgomery blog.

“A tight focus on costs and efficiencies, along with the ability to raise prices and charge for add-on features, has enabled the company to report growing revenue over the years.”

Last month, Montaka Global Investments pointed out that REA stocks had multiplied an incredible 900 times in 20 years. That’s better than Inc (NASDAQ: AMZN)’s 535-fold increase over the same period.

Try to find a house purchased in 2001 that’s multiplied its value 900 times over.

“Perhaps now is the time to be selling the investment property and buying REA?” Montgomery said.

REA shares are in a dip right now

REA has already reported its 2021 financial year results which were in line with expectations. But its shares have been punished.

“Since the full year results announcement on 6 August 2021, the share price has fallen 10%,” said Montgomery.

“The company’s articulated uncertainty about listing volumes and flow-through impacts of renewed and expanding COVID-19 lockdowns on property inspections, and therefore listings, are likely the reason for the recent selling in the share price.”

Real estate listings have dried up, with Montgomery recalling a recent conversation with an agent on the lower north shore of Sydney.

“Pickings are slim, with listings way below anything regarded as ‘average’,” he said.

“One real estate agent in Manly, Sydney told me normally there should be 130 properties listed at any time. At the time of writing, that number amounts to just 28.”

But according to Montgomery, this should not worry investors who hold for years.

“In the long-term, we expect the highly-anticipated and long-awaited normalisation of listing volumes to eventuate. This will, when it eventually occurs, provide a massive boost,” he said.

“Imagine how much the company could earn if Manly listings (reflecting all suburbs) rise from 28 properties back to 130-odd.”

The post Forget buying an investment property, grab this ASX share instead appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

More reading

3 reasons I just bought Amazon stock

Top broker thinks these ASX tech shares are buys

Top brokers name 3 ASX shares to buy next week

ASX investors were buying Robinhood, Square shares last week

The Bubs (ASX:BUB) share price has fallen 17% in a month. Here’s why

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tony Yoo owns shares of Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool Australia has recommended Amazon and REA Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!