The news that the UK housing market has been enjoying something of a mini-boom in 2013 is most welcome for banks such as Barclays (LSE: BARC) (NYSE: BCS.US).
Although its operations are heavily diversified, the UK property market still has a substantial impact on its performance, with house price rises not only providing more mortgage fees but also more business loans and credit card spending, as the economy picks up pace.
However, the help offered in recent months by the property market may yet come to an abrupt end if the demands made by the Royal Institute of Chartered Surveyors (RICS) are acted upon.
Indeed, they have become so concerned about the dangers of another unsustainable housing boom that they have called upon the Bank of England to limit national house price growth to 5% per year.
Whether the Bank of England pays any attention is yet to be seen, but it seems as though any boom in house prices will be constantly followed by a plethora of people saying that the rises need to be cooled and even held back.
Such a situation, then, is not ideal for banks such as Barclays. However, I’m still bullish on the shares for three main reasons.
Firstly, the recent rights issue puts the company on an even stronger financial footing than it was previously. This should help to improve market sentiment as, although some investors feel that the requirement by the FCA to raise capital was not really needed, it was deemed necessary nonetheless and shares are likely to have been relatively weak as a result.
Secondly, Barclays offers exciting growth opportunities over the next year. Indeed, earnings per share are forecast to grow by 21% in 2014 alone, making Barclays a true growth stock in the short to medium term.
Thirdly, shares currently offer excellent value for money. They trade on a price-to-earnings ratio of just 8.5 — well below the FTSE 100 on 15 and the wider banking sector on 17.
So, excellent growth prospects, a sound financial footing and attractively valued shares make me optimistic about the outlook for shareholders in Barclays.
> Peter owns shares in Barclays and will be taking up the rights issue.