Should I buy ASX 200 property shares following the RBA rate pause?

Property stocks might be back on the table following the Reserve Bank of Australia’s (RBA’s) latest interest rate decision, with a top broker tipping three real estate S&P/ASX 200 Index (ASX: XJO) shares as buys.

Citi analyst Suraj Nebhani points to the RBA’s decision to pause rates at 3.6% in April, as well as data suggesting house prices are rising, saying courtesy of The Australian:

[It] raises questions whether we are nearing a bottom of the residential property market.

That’s surely good news for those invested in the sector. The S&P/ASX 200 Real Estate Index (ASX: XRE) plunged nearly 24% last year amid what became 10 consecutive rate hikes – an effort to tame rampant inflation.

The sector has traded relatively flat so far in 2023, posting a slight 2% uptick over the last fortnight. Is this just the start of a notable recovery? Nebhani thinks so, continuing:

The impending mortgage cliff and lower borrowing capacity create some near-term uncertainty, but rising immigration along with low supply create a positive medium-term backdrop.

Let’s take a look at the three recently-embattled ASX 200 property shares Citi rates as buys right now.

3 buy rated ASX 200 property shares

Mirvac Group (ASX: MGR)

Citi has upgraded its outlook for Mirvac shares to a buy with a $2.40 price target – a potential 11% upside.

The property group saw its statutory profit fall 62% to $215 million in the first half of financial year 2023, mainly due to lower investment property revaluations.

The company’s CEO and managing director Susan Lloyd-Hurwitz said high inflation and interest rates created uncertainty for consumers and put pressure on economic growth during the period.

Stockland Corporation Ltd (ASX: SGP)

Also now buy rated is property development giant Stockland – Citi tips its shares to rise 11.5% to trade at $4.60.

The company’s commercial property leg delivered just $30 million of revaluation gains in the first half – down from $543 million in the previous period. That saw its half-year statutory profit tumble nearly 65% to $301 million.

Ingenia Communities Group (ASX: INA)

Finally, Citi recently initiated coverage of lifestyle communities developer and operator Ingenia Communities – slapping its shares with a buy rating and a $4.40 price target. That represents a potential 12.6% upside.

The softening residential real estate market, along with construction delays, dinted the company’s earnings last half. Its statutory profit fell 16% to $33.7 million in the period.

The post Should I buy ASX 200 property shares following the RBA rate pause? appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Friday
• Top brokers name 3 ASX shares to buy today
• Why now is a golden opportunity to earn passive income from Aussie real estate

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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