The announcement by Treasurer Josh Frydenberg to ease responsible lending laws. This is part of a wider group of measures designed to head off the worst of the coronavirus pandemic's economic impacts. The initial impact on the S&P/ASX 200 Index (ASX: XJO) shares was in the banking and mortgage related sectors.
Westpac Banking Corp (ASX: WBC) saw the largest share price rise of the big four banks last Friday with a jump of 7.39%. Other mortgage lenders such as Mortgage Choice Limited (ASX: MOC) also saw its share price jump up by 8.98%. While mortgage insurance company Genworth Mortgage Insurance Australia Ltd (ASX: GMA) saw its share price jump by a massive 10.21%.
Nevertheless, this is not the full extent of the impact. There are a range of ASX 200 shares that stand to gain from increased spending, including the real estate sector.
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Housing sales
Residential housing companies have seen share prices fall due to inactivity caused by the COVID-19 lockdown. Nonetheless, there are now two very strong indicators of potential growth over the next 18–25 months. Most notable, of course, is the likelihood of loosening the responsible lending laws. Moreover, recently the Commonwealth Bank of Australia (ASX: CBA) forecast an uptick in housing sales towards the end of 2021.
Australia's largest residential construction companies are privately owned. However, companies like Stockland Corporation Ltd (ASX: SGP) and Mirvac Group (ASX: MGR) are two of the largest ASX 200 shares in the country. Both companies have billions in residential housing pipelines, as well as healthy balance sheets. In addition, both companies are selling at historically low prices.
Companies like REA Group Limited (ASX: REA) and Domain Holdings Australia Ltd (ASX: DHG) are likely to see increased volumes. Arguably more so as companies will have to market heavily to overcome the absence of international buyers.
Building materials
This is an area where I believe there are a lot of opportunities, although not readily obvious. For example, ASX 200 share Boral Limited (ASX: BLD) is currently restructuring after several years of poor performance. The company has a new CEO and is working through a review of all elements of the business. It also counts Kerry Stokes' company, Seven Group Holdings Ltd (ASX: SVW) as a substantial shareholder, recently taking two board seats at Boral.
Other companies of interest include building products company CSR Limited (ASX: CSR), and James Hardie Industries plc (ASX: JHX). The latter being the world's largest manufacturer of fibre cement products. I am also watching Brickworks Limited (ASX: BKW). After posting a 93% increase in statutory net profits after tax, I think it is very undervalued.
