The chart attached paints an interesting (and not entirely surprising) picture of the relationship between interest rates and building approvals. Whilst many conversations around the property sector involve the words bubble and overheated it is easy to understand why some fund managers think businesses exposed to housing will prosper this reporting season. Chris Stott, CIO at Wilson Asset Management, says, We think this housing cycle will be longer than previous given the scope for interest rates to remain at record lows for the next 2-3 years. Further interest rate cuts cannot be discounted. Andrew Smith from Perennial has a similar view and is investing in direct and indirect exposures to the housing market. Smith says companies like Brickworks, AV Jennings, Fantastic Furniture and Aveo all provide reasonably priced exposure to this thematic.
I should mention the chart is courtesy of Dan Petrie at Bloomberg.