Australian Real Estate Weekly "Still too early for large cap resi" Zhang

Research evidence excerpt

Australian Real Estate Weekly "Still too early for large cap resi" Zhang

Global Research

22 June 2026ab

Australian Real Estate Weekly Equities

AustraliaStill too early for large cap resi

Real Estate

Solomon Zhang, CFA

Recent data points suggests the housing market continues to soften Analyst

Last week’s preliminary auction clearance rate fell to 47%, implying a final rate of ~42% solomon.zhang@ubs.com

assuming a standard revision on finalisation. This suggests continued softening in the +61-2-9324 2007

housing market, with the clearance rate down ~10%m/m to the lowest rate observed Cody Shield, CFA

since Apr-20 (see Figure 1Historicalauctionclearancerates). We note SQM Research are now calling for housing price Analyst

falls of up to 9% in Sydney and 7% in Melbourne. Whilst Residential REITs are now cody.shield@ubs.com

trading inexpensively at a 13x NTM P/E or a ~2STDV discount to historical averages, we +61-2-9324 2903

maintain it's too early to be bullish. In our deep-dive (see here), we note residential REITs Miriam Pritchard

typically trough ~60-70% of the way through a down-turn or specifically when there is Analyst

consecutive monthly improvements in the clearance rates or house price expectations miriam.pritchard@ubs.com

(see Figure 2Avgofresistockindex,auctionclearancerates&housepriceexpectationsover3mostrecentdownturns). Used in isolation, leveraging a simple 'trading rule' to buy SGP/MGR when +61-2-9324 2270

absolute or relative NTM P/E is >1STDV to historical averages generates relatively Aman Madhyastha

underwhelming returns (6.7% and 1.7% over a 6-mnth period, respectively). UBS Associate Analyst

economists expect a ~3-5% house price fall over the next 12 months, suggesting the aman.madhyastha@ubs.com