The Covid-19 pandemic brought a halt to moving house for a while, and it has hit companies like Taylor Wimpey (LSE: TW) pretty hard. The Taylor Wimpey share price is down nearly 40% so far in 2020. It will be hurting buy-to-let landlords too, as an increasing number of tenants are finding it hard to pay the rent. But there surely is great investing potential in the property market, isn’t there?
As a less risky strategy than buying your own buy-to-let property, investors have generally seen shares in property companies as offering decent reward with less risk. I’ve thought that myself, as you’re spreading your cash across a whole portfolio of properties rather than buying your own individual buy-to-let property. You get exposure to business sites too, so that’s a bit more diversity. But that strategy has come crashing down in 2020, as the retail sector has been devastated. It led to Intu, once a big favourite among property investors, going into administration in June.
Meanwhile, house prices are rising. According to the latest Halifax House Price Index, the average UK house price reached £241,604 in August. That’s up 1.7% on June’s figure, and 3.8% ahead of July 2019. There’ll be a number of reasons for the short-term jump after the market started to open up again. But I bet buy-to-let landlords are wishing they were seeing a similar spike in demand.
There’s pent-up demand from house buyers whose plans have been frustrated in recent months. Then there’ll surely be a boost from the temporary stamp duty holiday. We’ve learned in the past that when governments tweak the market using taxation, prices tend to change to balance it out.
So how should we go about property investing? I’ve had a buy-to-let house for years, and it’s been mixed as an investment. I did well in the early days, but a series of voids, repair work, and struggling to actually get the rents, has made recent years quite painful. If I had the time again, I’d have put the money into housebuilder shares instead. My capital would have grown quite nicely. But, more importantly, I’d have had a steady stream of dividend income. My dividend yields would have been way better than my rental yields, and all with zero effort on my part.
I really do see the Taylor Wimpey share price as a bargain now, and I wouldn’t touch buy-to-let today. The shares had started to pick up again after the initial pandemic crash. But that mini recovery has reversed now as people realise we could be in economic trouble for a lot longer than initially feared. But over the long term, the country’s severe housing shortage will continue. Taylor Wimpey looks priced to go bust right now, but I see no chance of that. It’s definitely a buying opportunity in my books.
Alan Oscroft has no position in any of the shares 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.