The Motley Fool

Property prices are soaring! Should I buy top UK property stocks now?

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.

Home key with house keyring with calculator.
Image source: Getty Images

The latest Halifax house price index for May was released today. It showed a rise of 9.5% over the past year. This pushed the average house price to a new record high of over £261k. Given the boom in the property market in that year, I’d like to get exposure to it. Obviously I could buy a house, but as a stock investor, I can actually get exposure via the top UK property stocks. 

Ways I can get involved

Some think that all the top UK property stocks fall into the category of being Real Estate Investment Trusts (or REITs). This isn’t strictly true. I can get exposure to the property market in several different ways.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

First, I could look to buy homebuilders. For example, Barratt Developments is one of the largest UK homebuilders at the moment. Rising property prices help support the share price as finished projects are worth more. Given that the company is constantly taking on new housing projects via its forward order book, the tick higher in prices will naturally feed in over time.

In fact, I think this rise over the past year is one reason why the Barratt share price is up 42% over the past year.

Second, I could look to invest in a top property stock like Rightmove. The company doesn’t own any property, but is the marketplace where buyers and sellers meet for real estate. In this way, higher prices should signal higher activity. More activity helps Rightmove make more money from the traffic on the website, along with more listings.

The correlation to rising property prices might not be as strong here as with other examples, but this could be ok if I feel I’ve got some property exposure elsewhere.

Finally, I come back to REITs. These are companies that specifically own real estate, usually commercial plots. An example here is British Land. The rent received is paid out to shareholders. Some 90% of income needs to be paid out to get the REIT classification.

Higher prices should boost the value of the overall portfolio being managed. However, as commercial property prices don’t always track residential prices, this might not be the best way for me to invest. I’d need to check how much of the portfolio is invested in residential housing first.

Should I buy the top UK property stocks?

In my opinion, house prices can continue to rally. So the question is how much exposure do I want to get? 

Personally, if I’m very bullish then I should buy homebuilder stocks. I think higher property prices will continue to support higher project revenue and a higher share price.

I could invest in a REIT, but often most of the portfolio is focused generating income from commercial property, which has been challenged of late. As a result, I wouldn’t invest in it to get exposure to rising residential housing prices.

As for Rightmove, I’m positive on the stock anyway, so would be happy to buy it for reasons other than just rising prices. 

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

jonathansmith1 has no position in any of the shares mentioned. The Motley Fool UK has recommended British Land Co and Rightmove. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.