THE DELTA DOMINATOR
The ‘hidden’ asset inside this Aussie icon that’s set to surge alongside the Aussie property market…Delta or not!
The real estate market just keeps roaring.
Values are up 14% since the start of the year, Australia-wide.
That’s the fastest rise in more than 25 years.
In Sydney, Canberra, Hobart, and Darwin, median prices have shot up more than 20% in 12 months.
Some results are literally insane.
The figures you generally hear are ‘median’ gains to generalise for an entire suburb.
Individual properties can dwarf these.
We’re talking to the tune of $200–300K — sometimes even higher — in 6–12 months.
Nobody in the mainstream press forecast this. In fact, many there said the complete opposite.
ANZ Bank, for example, forecast rising values in January 2020 and then falling values when COVID hit. Now, they’re chasing the market up again.
Analysts at ANZ weren’t the only ones wrong-footed…
Two financial commentators, Harry Dent and Martin North, hit the news in May last year.
The suggestion was housing in parts of Australia could fall by ‘up to 50%’.
You know how that worked out.
But we called the complete opposite at Cycles, Trends & Forecasts.
Here’s what we wrote in our special report, released in May 2020…(the height of the COVID panic!):
‘The current recession is going to lower competition for good sites and bring some distressed properties to market.
‘This will give buyers with the cash or finance on hand an unusual and very big opportunity to acquire real estate…before the tidal wave of government stimulus, tax cuts and infrastructure spending send the land market soaring again.’
How did we do it? You know how…understanding the ‘twin drivers’ behind the property cycle.
Property gains + stock market wins = Boom times for you!
We also told you that you don’t have to be a millionaire real estate developer to cash in here, either.
You could do it through property-related stocks on the ASX as well.
We also advised closing out of two positions with returns of 160% and 80% in under a year. Well done if you profited from those.
There’s been two minor losses for -7% and -27%. I will take those on the chin.
Between open and closed positions, the return from our buy list was 23.7% at the close of trade on 25/8/21.
Not a bad strike rate, I’m sure you’ll agree, considering most are conservative and low-volatility positions.
Our remaining stocks are about to pump out their full-year dividends, too — important cash flow with deposit rates at zero.
But the Delta virus outbreak is beginning to spook some investors and blur the market’s read on where the economy is heading.
A recent report says property investors are selling into this market.
See for yourself…
This will prove a bad, bad move for most of these investors.
Will delta halt the real estate cycle?
The short answer is easy…
We are in a global cycle now.
Look at the chart below to see the extent of the government policy response to the COVID economic disruption compared to the global financial crisis…
Source: Sims Limited
The sums are huge.
Property markets are absorbing this spending — and part of why property is surging all over the world.
House prices in May were 16.6% higher than the year before in the US.
UK house prices are rising at their fastest pace since 2004.
Not only that, foreign money is beginning to pour into the relative safety of Australia.
Investors in Singapore are loading up on Australia…pouring in $20 billion over the last two years.
This is the cycle playing out right in front of us.
This boom is getting bigger, not smaller!
Today, I have another property cycle stock that I think is set to cream the market in the next few years.
I call it my ‘Delta Dominator’.
Not only does it make money from a booming property market, it benefits from the current Delta lockdowns.
20 years gone… and a chance to soar again
‘Callum, nobody will admit it, but I have the toughest job on this floor.’
The guy telling me this was the real estate editor for the Herald Sun. I was 20 years old and doing work experience as a journalism student.
‘Why?’ I asked.
‘The Age has always dominated real estate classifieds in Melbourne.’
Perhaps you remember the days when the weekend paper was so big it had two components?
I do. The paper would thud when my dad dropped it on the table as part of our Saturday morning breakfast routine.
This was before the internet sucked the life out of the traditional newspaper business.
But some of those legacy media brands are set to make a comeback.
The 18-year cycle has all the potential to turbocharge their earnings once again.
And the Delta outbreak?
It’s highly likely to be a benefit to this company, as you’re about to see…
The Delta blues for you and me
Down. Down. Down.
Unfortunately, I’m not talking about NSW’s COVID cases.
I’m talking about the property market’s clearance rates and listings.
These sporadic lockdowns temper the market where and when they take effect.
They will supress some property auctions, inspections, and transactions.
Lockdowns defer activity to the future. But they don’t halt the cycle.
Catherine reports that plenty of people are prepared to buy sight unseen. The speed of price rises getting away from them trumps everything else.
But few stock investors study the real estate cycle…
That’s why you are a mile ahead of everybody else by simply subscribing to Cycles, Trends & Forecasts.
It hands you a window of opportunity as well…to look beyond these short-term hiccups to when the property market is back in full swing.
And we have no doubt at Cycles, Trends & Forecasts that this is exactly where Australia is heading.
But we want to capitalise on the market as it is now too…
What better then than a stock that can benefit from a surging property market and the Delta suppression strategy of Australia’s politicians?
Yep, a company that can also monetise all the people stuck at home with nowhere to go and nothing to do.
I’ve found one!
A ‘hidden’ asset for a bigger player in Aussie media
I told you earlier how the internet sucked the life out of the traditional newspaper business.
Here in Australia, a lot of that classified real estate value migrated online to realestate.com.au.
You could buy the original REA Group Ltd [ASX:REA] for a few bucks per share when I did my work experience. Now it’s a $20 billion behemoth…and $150 per share!
REA Group’s main rival for this business today is Domain Holdings Australia Ltd [ASX:DHG].
This is the legacy property masthead spun out of Fairfax back in 2017.
It now trades for around $5 a share and has a $2.9 billion market cap. A much smaller foe for REA Group.
But Domain is a very different business to the one that dominated the Melbourne real estate scene when I was a student.
Today it’s a multimedia platform across print, mobile, and the web. Domain released its results last week. Revenue was up 10%.
The company is confident enough in its future cash flow to resume paying dividends and pay back JobKeeper.
The CEO said:
‘We’ve learned that really the patterns of behaviour with listings over the last 18 months, where listing volumes have bounced back very, very strongly as soon as restrictions ease, seems to be a continuing pattern.’
And he added that demand for property is ‘extraordinarily strong’.
Listing views at Domain were up 40% between March 2020 and 2021.
However, the lockdowns do hurt it and REA in the short term.
But the cycle tells us that they will normalise — and grow — at some point.
We want some exposure to the explosion in listings and turnover we expect over the next five years.
However, I’m not going to recommend you buy Domain. We’re going to be more strategic than that!
If you’re intrigued enough to want to read the rest if this issue of Cycles, Trends & Forecasts and get the full details of this month’s recommendation…
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