The housing market in the UK, once so moribund, is recovering. And this recovery is now gathering pace.
Many have observed that the house price increases have been highest in London. But previous housing booms have shown that, while the recovery tends to begin in the capital, house prices soon rise across the country.
So, which companies will benefit most from increasing house building and increased home ownership? Here are my three plays on the housing boom….
Lloyds
Lloyds Banking Group (LSE: LLOY) (NYSE: LYG.US) is, by some distance, the biggest mortgage provider in the country, owning banking brands such as Halifax, TSB and Lloyds Bank.
So, if more people take out mortgages, and house prices increase, then this is likely to boost Lloyds’ mortgage business, and thus its profits and share price.
This company is just returning to profitability, but profits are set to increase at a rapid rate, as the company is buoyed by house buyers returning to the market, and a recovering economy.
This is why I have recently invested in Lloyds, and why I think you may want to as well.
Barratt Developments
Barratt Developments (LSE: BDEV) is a leading property developer. I tipped the shares in the depths of the eurozone crisis, when the share price fell as low as 70p.
At the time, these most cyclical of shares were crashing through the floor as house prices, house building and mortgage approval rates were all tumbling.
But the thing about cyclical shares is that, when the share price recovers, these can be some of the most profitable shares you will ever buy. Since the eurozone crisis, Barratt’s share price has more than quadrupled.
But I think this company is investing proactively in building more properties and buying more land over the next few years, and that’s why I think its share price will increase further in the months and years ahead.
Travis Perkins
So, I have tipped a bank and a house builder so far. I also think the building materials supplier Travis Perkins (LSE: TPK) is a buy.
This company sells building materials to house builders, as well as to the general public through the Wickes retail chain.
Even during the Great Recession, the business has been growing. I expect Travis Perkins to grow further as it benefits from increasing confidence in the housing market.
Travis Perkins’ share price has already increased a lot, but I think this company still has room to grow.
