Newspaper headlines this month screamed about the end of the great home ownership dream and Australia becoming a nation of renters. But this problem is also an opportunity for investors who identify companies that will benefit from rental trends.

Fewer than half of all the nation’s adults will own their home by next year, according to the latest Household, Income and Labour Dynamics in Australia (HILDA) survey. A lifetime of renting will be the norm for millions of people who face falling housing affordability.

This powerful trend will ripple through all facets of Australian society; from communities that have more transient populations; to the shape of the nation’s housing stock; and changing demand for products and services that help renters.

New markets will be created and existing ones expanded to deal with an influx of renters – think specialised relocation and transport services, self-storage providers, or new property investment platforms.

Other markets will suffer. Renovation activity, for example, could face headwinds if more people rent and are unable to paint a wall or hang a picture without their landlord’s consent. Furniture demand could weaken if renters are less likely to upgrade existing tables or sofas, or buy new ones because of smaller accommodation and low or no interest in home improvement.

Demand for home lending and wealth management products could also be affected in the next five to 10 years if more people turn their backs on home ownership.

It is too long a bow of course to suggest selling building materials, banks or wealth management stocks because of home-ownership trends. This change has been underway for years – if anything, I’m surprised the HILDA survey, impressive as it is, received so much attention.

Still, this powerful home ownership trend will have investment implications. I expect the trend to accelerate as falling interest rates drive property prices higher and further out of reach for younger generations who are struggling with record-low wages growth and student debt.

What happens when home owners in Australia are the minority? Or when one’s wealth and social status are increasingly influenced by whether you own or rent a house?

I’m surprised that business – and policymakers for that matter – have been slow to recognise the needs of a nation of renters. Long-term leases and improved tenant rights (as in Europe) are part of a larger industry of specialised rental service providers that is long overdue.

Long-term investors who include small-cap stocks in their portfolio have a few new options to gain leverage to the rental trend. They range from specialised Australian Real Estate Investment Trusts (AREITs) to relocation services, and property investment platforms.

1. National Storage REIT

I have followed the self-storage operator since its December 2013 float and included it in a Switzer Super Report on urbanisation in June 2015. National Storage, an AREIT star, rallied from about $1.50 then to $1.87 in May 2016 and now trades at $1.62.

My interest is twofold. First, demand for storage space will rise as more people live in smaller rental apartments and need extra space. Second, the self-storage industry is highly fragmented with many private owners and is ripe for consolidation.

National Storage is not cheap, trading well above its latest net tangible assets of $1.18. But it has better growth prospects that most small-cap AREITs, in part due to a business model that owns and manages self-storage facilities. It looks more attractive after price falls since May.

National Storage REIT

Source: Yahoo

2. Updater Inc

Shares in the consumer-relocation technology company have rallied from a 20-cent issue to 38 cents after it raised $22 million at 20 cents and listed on the ASX in December 2015.

The New York-based Updater is a play on relocation trends in the United States. Its Mover Product, free for users, providers movers in the US with a centralised online service to organise and complete relocation-related tasks.

Updater allows real estate agents to provide personalised moving service for clients and for businesses that provide home-removal and other relocation services to access this market.

Updater processed nearly 90,000 unique household moves in June, for an estimated market share of 4.7% of all moves in the US. Updater’s share of this huge market is growing quickly, albeit of a low base and it backed by some prominent investors and directors.

Although not a play on Australia’s rental market, Updater shows the potential of using technology platforms for a growing market of people who move locations.

Updater Inc

Source: Yahoo

3. DomaCom

The innovative crowdfunding platform, due to list on August 18, is an Initial Public Offering to watch. DomaCom is raising $23.7 million to develop its property investment service.

DomaCom’s platform allows investors to buy an interest in any property for sale in Australia, and potentially later sell that interest to another buyer – a bit like a stock exchange for property investors who can buy and sell fractions of a property if there is a market.

They could, for example, invest $40,000 to buy a tenth of a $400,000 property with likeminded investors. Or have a small share in multiple properties to boost diversification compared to owning one house.

DomaCom could solve a problem for renters who want access to property investment but cannot afford or qualify to buy a whole property. Proportional property investment is also available through the AREIT market, where investors buy units in a trust. But most AREITs own commercial, industry or retail properties.

DomaCom is an early-stage business and it is far too soon to know if this form of property investment will take off. But the broad concept of fractional property investment has appeal in a nation of renters – particularly if a few renters (think siblings) get together and buy majority ownership in a rental property, giving them control and residential security.

In time, parents and their children could co-invest and buy majority stakes in properties, break into the market, and have similar control to home owners but without the debt.

Like most IPOs, investors should wait and watch how DomaCom trades as a listed company before rushing in. If this form of property investing takes off, DomaCom will be worth a lot more in the next five years than it is today, but at its current size it suits speculators.

4. Arena REIT

At first glance, linking rental trends to childcare looks a stretch. But the HILDA survey suggests there will be growing wealth inequality based on home ownership in coming years. This in turn means more dual-income families working longer and outsourcing childcare during work hours.

Granted, lots of factors are driving higher childcare demand. The HILDA survey also shows that financial stability greatly affects family formation. It’s possible that some renters will delay having children, have fewer or none at all, because of lower financial stability.

My sense is that a more urbanised, transient population of renters, many of them families, who have fewer community connections (and child-minding support) will add to demand for childcare.

I favour Arena REIT, an investor in childcare-centre properties, as a lower-risk way to the childcare trend. I last covered it for this report in September 2015 as part of an analysis on five promising specialist property trusts. Arena has rallied from $1.55 then to $2.10.

Like National Storage, Arena is performing well and is not cheap. But I like the childcare industry’s long-term thematics (notwithstanding regulatory risk), and ARENA’s property exposure is in a sector that will be in greater demand.

Arena REIT

Source: Yahoo

5. FSA Group

A number of financial service stocks have leverage to low-income earners who often rent. These “hardship stocks” buy distressed debt from banks or utilities for a fraction of the loan and try to recover it. Others offer specialised financial products or services for low-income earners.

Credit Corp, Collection House, Pioneer Credit, and FSA Group are examples. Listed pawn broker, Cash Converters International, is another in the space.

A renter, for example, who changes address, does not notify their gas provider and leaves a string of unpaid debts is a typical target for listed debt collectors. Others who struggle to manage their finances might call FSA Group for budgeting advice.

FSA is Australia’s largest provider of consumer-debt solutions and lends to individuals and small businesses. It is best known for the Fox Symes Debt Solutions business, which offers debt solutions such as budgeting advice, informal creditor arrangements, personal insolvency agreements and bankruptcy advice. Its target market is consumers who urgently need help to restructure their debts.

FSA has fallen from a 52-week high of $1.60 to $1 after a lower-than-expected interim result. It sold its factoring business to CML Group in May. Perpetual, a good judge of small-cap stocks, become a substantial holder in FSA this month with 5.4% ownership. I suspect more small-cap fund managers will start to see value in FSA.

FSA Group

Source: Yahoo

6. Thorn Group

Thorn Group is a clear beneficiary of home-ownership trends as more renters choose to rent home equipment, such as whitegoods, rather than buy them.

Thorn has shed more than half its share price after closing its TFS consumer loan business, writing off the book value of its debt-collection business and downgrading earnings guidance. It share price tumbled on the news. The Federal Government inquiry into small amount contracts and consumer leases has also weighed on sentiment toward this sector.

Thorn is now prioritising growth in it home-equipment Radio Rentals and small business lending operations – a good move given its strength in these markets.

It’s too soon to say the worst is over for Thorn, but the current price is factoring in a lot of bad news for the dominant provider of home rental equipment as Australian becomes a nation of renters. Bargain hunters might wait to see stabilisation in Thorn’s share price descent, and some consolidation, before buying.

Thorn Group

Source: Yahoo

• Tony Featherstone is a former managing editor of BRW and Shares magazines. The information in this article should not be considered personal advice. The article has been prepared without taking into account your objectives, financial situation or particular needs. Before acting on the information in this article you should consider the appropriateness of the information, with regard to your objectives, financial situation and needs. Do further research of your own or seek personal financial advice from a licensed adviser before making any financial or investment decisions based on this article. All prices and analysis at July 27, 2016.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.