The house prices in Australia continue to surge, rising 2.2% in May 2021. This seems to suggest a strong end to FY21 for ASX shares.
How strong was the surge?
CoreLogic revealed that national prices went up 2.2% across the country, though there was varied performance in different cities.
In Sydney, the price went up 3% in just one month. Melbourne prices grew 1.8%, Brisbane prices rose 2%, Adelaide prices rose 1.9%, Hobart prices went up 3.2%, Darwin prices grew 2.7% and Canberra prices rose 1.7%. The ‘worst’ decline was a 1.1% rise for Perth, which in most cases would be a really strong rise.
The combined regional performance was a 2% increase.
CoreLogic’s research director, Tim Lawless, commented on the fundamentals driving strength in the housing market remain in place:
“The combination of improving economic conditions and low interest rates is continuing to support consumer confidence which, in turn has created persistently strong demand for housing. At the same time, advertised supply remains well below average. This imbalance between demand and supply is continuing to create urgency amongst buyers, contributing to the upwards pressure on housing prices.
“Despite the consistently strong headline results, the underlying trends have shifted over the past year. The most expensive end of the market is now driving the highest rate of price appreciation across most of the capital cities, whereas early in the growth cycle it was the most affordable end of the market that was the strongest.”
What does this mean for ASX shares?
There are plenty of ASX shares that have a vested interest in house prices remaining strong.
Banks like Commonwealth Bank of Australia (ASX: CBA), Australia and New Zealand Banking Group Ltd (ASX: ANZ), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) benefit from both loan demand and a resilient loan book.
There are plenty of ASX shares that are involved in providing consumers with products for their house, whether it’s building it or products inside like Brickworks Limited (ASX: BKW), CSR Limited (ASX: CSR), Wesfarmers Ltd (ASX: WES), Nick Scali Limited (ASX: NCK), Adairs Ltd (ASX: ADH), Beacon Lighting Group Ltd (ASX: BLX), Temple & Webster Group Ltd (ASX: TPW) and Mirvac Group (ASX: MGR).
And don’t forget the portal businesses of REA Group Limited (ASX: REA) and Domain Holdings Australia Ltd (ASX: DHG).
It’s good news for those ASX shares, though tough luck for younger Aussies hoping to buy a house.
FY21 could be good for the above ASX shares, but it’s hard to say how long this growth trend is going to go on for.
