The UK housing market is showing flickers of recovery. But does this mean it’s time to invest in property stocks?
Contrary to some analysts’ predictions, 2023 didn’t witness a property market crash. Mortgage rates began to decline, boosting buyer demand and giving sellers more confidence in their asking prices.
The Royal Institution of Chartered Surveyors indicates a shift towards a less pessimistic view on house prices and buyer demand. Furthermore, estate agent Knight Frank has revised its market forecasts upwards, and Halifax reported an increase in prices last year.
Property Market Data
Property market data can be challenging. For instance, there’s often a two-month lag in the Office for National Statistics house price index due to Land Registry delays. Meanwhile, figures from Halifax and Nationwide reflect their lending levels and the types of properties bought, not the entire market.
Mortgage rates significantly impact the property market. High rates in mid-2023 slowed mortgage approvals, as prices remained steep and interest rates increased. The conclusion of the Help to Buy scheme also affected housebuilders’ profits.
Housebuilders’ Struggles and Recovery
Major housebuilders, including Persimmon and Barratt Developments, saw reduced profits and cut back on construction. But with inflation slowing and hopes of interest rate cuts, the situation might be improving. These companies are key players in the FTSE 100, known for decent dividends, although some have recently reduced these payouts.
Market Competition Heats Up
The competition is intensifying in the property listings market. Rightmove faces challenges from OnTheMarket, now backed by US real estate giant CoStar. JP Morgan’s recent downgrade of Rightmove reflects these competitive pressures.
Expert Perspectives
Analysts like Ben Yearsley and Russ Mould suggest that with peaked rates and a political push for more housing, the market might pick up. Mould also notes that housebuilding stocks have rallied since October, suggesting growing market optimism.
To Invest or Not to Invest?
Investing in property stocks right now is a nuanced decision. The market shows signs of recovery, but there are still uncertainties, especially regarding interest rate cuts. While some indicators suggest it might be a promising time to invest, it’s essential to stay informed and consider all factors before making any decisions.