The Best Play On The UK Property Boom!

Zoopla Property Group PLC (LON:ZPLA), Rightmove Plc (LON:RMV), Foxtons Group PLC (LON:FOXT), Persimmon plc (LON:PSN) and Barratt Developments Plc (LON:BDEV) are all great plays on the UK property boom.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

foxtonsThe UK property market is booming, with annual house price growth accelerating to 8.4% in August — the highest rate of growth for nearly seven years.

And there are plenty of ways for investors to profit from this trend: Zoopla (LSE: ZPLA), Rightmove (LSE: RMV), Foxtons (LSE: FOXT), Persimmon (LSE: PSN) and Barratt Developments (LSE: BDEV) are just five possibilities. 

Online shopping 

Property websites Zoopla and Rightmove are two companies that have seen profits surge as a result of the current property boom. Zoopla, for example, recently reported that its websites and mobile apps were seeing a record level of traffic, with 45.5m average monthly visits during the second quarter of the year, an increase of 34% year on year. 

With levels of website traffic surging, Zoopla’s management remains confident that the group can hit the City’s full-year earnings targets set out for the company. The City currently expects Zoopla to report earnings per share of 6.8p this year, rising 31% to 8.9p next year. 

Rightmove is also experiencing rapid growth. Current City forecasts expect Rightmove’s pre-tax profit to jump 21% this year, followed by growth of 14% to £113m during 2015. Both Zoopla and Rightmove are benefiting from a strange phenomenon called ‘property porn’; essentially, the trend of people viewing homes with no intention to buy. This is frequently quoted as the reason why traffic to these sites is surging. During January of this year, visitors to Rightmove’s website viewed a total 1.45 billion pages of property, making Rightmove one of the UK’s top websites in general.

Agent fees

If you’re not a fan of ‘property porn’ then Foxtons offers an attractive alternative. Foxtons is London’s leading estate agent and has made a tremendous amount of money from the property boom in the capital.

Indeed, for the first six months of this year Foxtons’ pre-tax profit rose 57.1%, to £23.1m and revenue grew 16.2%, to £72.8m, driven by strong sales and mortgage-broking growth. However, the market reacted badly to these results, sending the company’s shares down around 5% after their release.

Unfortunately, these declines could have something to do with the company’s valuation, which could be too rich for some investors. Foxtons currently trades at a forward P/E of 14.6, although City analysts have a dividend yield of 4.7% pencilled in for this year, which is appealing. 

Bricks and mortar 

The third way to profit from the property boom is with the homebuilders. Persimmon and Barratt Developments are two of the sector’s best picks.

Persimmon for example has become an income stock, as management seeks to return cash to investors following several years of solid performance. In total, the company is looking to return £1.9bn to investors, or around £6 per share. Some distributions have already taken place as the company paid two separate special dividends totalling £1.45 per share, or £442m, on 28 June 2013 and on 4 July 2014.

The third payment is scheduled for July 2015 and is expected to be around £0.95p per share, for a total of £290m. City analysts believe that these special payouts will equate to a dividend yield of 7.4% for next year alone. 

Barratt is also an income play. The company has just hiked its dividend by more than 300% to 10.3p per share, alongside full-year results. At present levels this payout is equal to a yield of 2.5%. However, like Persimmon, Barratt’s management has decided to offer investors several special dividends. Barratt’s special cash payment programme is expected to return £400m to shareholders over three years, with the first payment of £100m scheduled for November 2015.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

This FTSE 100 passive income gem now has a forecast yield of a stunning 8.5%, so should I buy more?

This FTSE 100 dividend giant already has a very high yield, and is projected to go even higher in the…

Read more »

Young Caucasian girl showing and pointing up with fingers number three against yellow background
Investing Articles

3 key reasons why I think BP’s share price could soar following a 16% fall over the year…

BP’s share price has lost considerable ground over the course of the year, but I think there are three reasons…

Read more »

Businessman hand stacking money coins with virtual percentage icons
Investing Articles

Building a second income with FTSE 100 dividend shares: my simple 3-step plan

Mark Hartley outlines a straightforward three-step approach to building a second income portfolio with well-established FTSE 100 dividend shares.

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Experian: still one of the UK’s top shares as strong growth continues

Experian shares are up after the firm’s latest trading update. So should UK investors consider buying one of the FTSE…

Read more »

Close-up image depicting a woman in her 70s taking British bank notes from her colourful leather wallet.
Investing Articles

Is Lloyds Banking Group the ultimate FTSE 100 value stock?

When Harvey Jones bought shares in Lloyds a couple of years ago he thought it was the ultimate value stock…

Read more »

Senior Adult Black Female Tourist Admiring London
Investing Articles

See what £10k invested in ailing GSK shares is worth today…

No investor will be happy with their GSK shares as the FTSE 100 pharmaceutical giant has had a dismal decade.…

Read more »

A young black man makes the symbol of a peace sign with two fingers
Investing Articles

2 profitable penny stocks that are outpacing Rolls-Royce this year!

Intent on uncovering the best penny stocks in the UK, our writer has identified two gems that are beating the…

Read more »

Mature black woman at home texting on her cell phone while sitting on the couch
Investing Articles

£10,000 invested in Lloyds shares at the start of 2025 is now worth…

Lloyds shares have risen from 55p to 76p this year. This means that those who invested in the bank at…

Read more »