Building for the future: 3 cheap UK shares to invest in for 2022

There’s more growth to come in the UK housing market, which is good news for investors. Here are three cheap UK shares for me to invest in for 2022.

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A house being constructed in the countryside

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The UK housing market has boomed in 2021 on the back of a stamp duty holiday and a country full of people still keen to move home. For my money, I think there’s more growth to come in the housing market, which is good news for investors in building and construction. Here are three cheap UK shares I plan to invest in for 2022.

Barratt Developments worth investing in

It has been a bit up and down in 2021 for Barratt Developments (LSE:BDEV), which traded at a 52-week high of 799p back in April, but there are sound reasons to think the company can hit those heights again.

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Industry insiders are expecting house building demand to be strong in 2022, with the Construction Projects Association anticipating a further 9% growth in house building projects. This is good for Barratt whose core business remains home construction.

Barratt has made mistakes in the past that it is still paying for, which tempers enthusiasm a little. Earlier this year for example, Barratt shelled out £56m to fix construction errors on past projects, including a Croydon tower block built back in 2002 that featured similar problems as the ill-fated Grenfell Tower in London. There is no guarantee further past errors won’t crop up again.

Nevertheless, Barratt still has plenty of cash on the balance sheet to finance new building projects. It looks like a reasonable share investment to me.

Taylor Wimpey to head upwards?

Like Barratt, Taylor Wimpey (LSE:TW) has been purchasing as much land up as possible over the last 12 months or so, suggesting it expects the house building boom to continue. If this is the case, I expect Taylor Wimpey’s share price to head upwards in 2022.

There are clear risks with its bold land purchasing strategy though. Firstly, and even though I agree with the sentiment, Taylor Wimpey is assuming that new-home demand will continue next year. I hope it is right, but this isn’t a given, especially if interest rates rise and the housing market cools off.

Secondly, if the market cools it means cash is tied up. This will hit dividend payments. I’d still be confident Taylor Wimpey is a decent punt, though. I certainly think there is more upside to investing than there is downside.

Persimmon’s strong dividend yield

Last but not least, I think Persimmon (LSE:PSN) is worth some consideration. The key reasons for supporting this share are the same as Barratt and Taylor Wimpey, but there is one more factor that makes Persimmon attractive. A strong dividend yield of 8.4% at the current share price far outstrips those two rival firms, making this stock an attractive passive income proposition.

The negative caveats apply to Persimmon too, just as they apply to Barratt and Taylor Wimpey. Growth in the Persimmon share price assumes demand for new housing in the UK remains high throughout 2022.

I can see further growth in the share price, but I’ll be reassessing my position at the end of H2 2022, by which time we’ll have a better ideas which direction the house building market is heading in.

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Garry McGibbon has no position in any of the stocks mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

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