The Motley Fool

Why Are Housing Stocks Sinking?

After putting in an impressive performance last year, the homebuilders Persimmon (LSE:PSN)Barratt Developments (LSE:BDEV)Taylor Wimpey  (LSE:TW)Berkeley Group (LSE:BKG) and Bellway (LSE:BWY) have all seriously underperformed the market this year. And things are unlikely to get better any time soon. 

A great year 

Last year was a great year to be in the homebuilding business for several reasons. Firstly, rising house prices, boosted by the help to buy scheme, sent profits surging. Additionally, the availability of cheap credit sent demand skyrocketing. 

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

OLYMPUS DIGITAL CAMERAHowever, the Bank of England(BoE) has become concerned about the effect that rising house prices are having on the economy. As a result, the bank has hinted that it may begin to hike interest rates later this year and has started to introduce other measures aimed at cooling the property market.

With the BoE set on reigning in the property market, investors have become concerned that the market could suddenly take a turn for the worse. There are also some signs that demand for housing is starting to fall as high prices put off buyers. 

A silver lining

However, as the BoE and the government work to introduce measures aimed at taking some heat out of the market, the government is trying to encourage house builders to build more affordable housing.

The most recent of these measures is the government’s commitment to help builders develop brownfield land. Brownfield land is best described as derelict and disused industrial or commercial land, which often needs to be cleaned up before construction can begin.

The government has asked local councils to relax planning laws for the development of brownfield land. Hopefully, this will spur a construction wave of affordable housing. 

There is enough brownfield land in England for 2.5m new homes. So, if councils begin to work with developers there is huge potential for the industry. 

Starting to cool

Still, away from the affordable housing market, there are signs that the UK housing market is starting to cool.

According to Rightmove, house prices increased by just 0.1% last month, ending many months of high single-digit gains. What’s more, the UK’s leading property website noted a 0.5% fall in London property prices. 

Rightmove’s data shows that the London market is now faced with a wave of sellers, but few buyers. Specifically, the company reported that last month the number of homes for sale within the capital jumped 20%, while the number of buyers remained constant. 

This lack of demand implies that high prices are scaring some buyers out of the market. It also shows that the affordability caps, introduced by banks like Lloyds and RBS are starting to have an effect.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Rupert does not own any share mentioned within this article.

Where to invest £1,000 right now

Renowned stock-picker Mark Rogers and his select team of expert analysts at The Motley Fool UK have just revealed 6 "Best Buy" shares that they believe UK investors should consider buying NOW.

So if you’re looking for more top stock ideas to try and best position your portfolio in this market, then I have some good news for your today -- 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 enter your email address below to discover how you can take advantage of this.