How to invest in property stocks

With the stamp duty holiday almost over and the third lockdown likely to end there is going to be some big movement in the housing market. There are some great ways to invest in the property market indirectly. Read on to get started! 

Housing Market Update

Not surprisingly there has been some changes to supply and demand of houses due to the pandemic. The highest demand change has been for properties in outer London as buyers are preferring space over location. It appears homeschooling and cold weather conditions are encouraging many people to hold off selling homes until spring, accentuating the usual seasonal trend. After three months of falling house prices in London, there has been a 3% increase in property prices from January to February. Overall, however, the average asking price for London properties has fallen by 1.1% this February compared to February 2020. 

The stamp duty holiday is soon to end leading to predictions that buyer demand will decrease as the lengthy buying process will mean missing the deadline to save up to £15,000. The stamp duty cuts have promoted a sense of urgency in the housing market, the average time to agree a sale at 57 days compared to 71 days for the previous year.

Overall, the number of new buyers has increased, despite few being able to take advantage of stamp duty cuts. With demand overpowering supply, prices are being pushed up. A massive 21% drop in sellers is likely a result of families delaying selling due to homeschooling pressures. Last year set the precedent of seeing more buyers moving to properties more suited to lockdown needs.

As property markets are open across the UK with estate agents allowing in person moving and no restrictions on moving, the market has been on the rise. Property sales in December are up 32% year-on-year based on transactions statistics from HMRC. Rightmove found asking prices had dropped 0.9% month-on-month in January but risen 3.3% year-on-year.

Housing Market Predictions

With government coronavirus financial support schemes and stamp duty cuts coming to an end it is unsure whether the increased activity in the housing market will continue. The current best guess is that house prices will level off in 2021. Rightmove predicted house prices will rise 4% over 2021 following a lull in Q2 after stamp duty cuts end. Whereas Halifax forecast house prices to fall by 2 – 5% this year and the Centre for Economics and Business Research (CEBR) predicted a fall by 5%.  Estate agents Savills and Hamptons are holding strong that house prices will stay the same, whereas Chestertons and Knight Frank predict a 1.5% and 1% rise respectively. If you think this is confusing, don’t worry we agree! Therefore unless you were planning to buy or sell anyway it is best to stay clear of investing in the house market until trends are clearer. 

The biggest tell on how house prices will perform is the state of the economy. If there is a sharp decline in the economy accompanied by a surge in unemployment then we are likely to see ‘pressure sales’. People who can no longer keep up mortgage repayments have no option but to sell their homes, and quickly. Although this crash is more than possible, support from the government and banks will more than likely prevent forced sales.

Before you invest in property stocks, you will need to open an account with a broker to manage your investments. 

Choosing the best online stock broker can make the difference from an easy and exciting new experience to  constant frustration and disappointment. Accessing financial markets through online brokers is easy and inexpensive but there are so many out there tailored to a different sort of customer so choose the right broker that will optimise your user experience and profits. 

If you’re just starting out we recommend eToro and easyMarkets for their easy to use interfaces and fee – free trading.

How to invest in property indirectly

Investing in the housing market indirectly could be very lucrative and significantly easier than investing directly. 

Real estate investment groups (REIGs) are great for people who want to own real estate but without the hassle. A REIT is created when a corporation (or trust) uses investors’ money to purchase and operate income properties.  Like regular dividend-paying stocks, REITs are a solid investment for stock market investors who want to have a regular income. 

British Land (LSE: BLND) is listed on the FTSE 100 and is a huge commercial property REIT. This £5.5bn firm owns an £11.7bn portfolio of property. This company offers a 5.3% dividend yield and currently is undervalued.

Big Yellow Group (LSE: BYG) is a FTSE 250 stock option, the company provides storage units and holds A LOT of property. The Big Yellow share price has doubled over the last five years as the business has grown rapidly.

Berkeley Group Holdings (LSE: BKG) is an upmarket homebuilder. This FTSE 100 firm focuses on London and the south east. Berkeley shares have performed strongly this year pushing the company to return £280m to shareholders each year until September 2025. Shares offer a cash-backed yield of 4.4%. 

Now we’ve provided our top housing stock options, will you be investing? We recommend eToro and easyMarkets for beginners. 

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