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5 UK shares I’d buy after Budget 2021

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The UK’s second largest home-builder, Persimmon (LSE: PSN), was among the big FTSE 100 gainers as today’s stock market session began. This was for a reason. PSN released its final results for 2020 today, making this UK share attractive to investors. 

Persimmon leads real estate rally

Both Persimmon’s revenue and profits declined in 2020. But investors look to the future value of their capital. And to that extent, PSN gives reason for optimism. 

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For the first half of 2021, it expects new home completion levels to be almost back to the pre-pandemic levels of 2019. It also expects a 15% increase in forward sales levels. 

Budget 2021 supports property markets

But the best was yet to come. In its update, Persimmon had said that it was supported by “low interest rates, good mortgage availability and ongoing Government support measures”

So when Chancellor Rishi Sunak said that the stamp duty waiver will continue up to June and made it easier for borrowers to pay only 5% of deposit, PSN’s share price has gotten an even bigger boost.

With these announcements, it is no surprise that other property shares also rallied. FTSE 100 property biggies like Taylor Wimpey, Barratt Developments, and Berkeley Group Holdings are all up at least 2.5% as I write. 

FTSE 250 property developers have also seen a rise. Notable among these UK shares are Crest Nicholson Holdings and Bellway, both of which are up by more than 4%.

FTSE 100 real estate stocks I can buy now

I have long liked all FTSE 100 real estate developers. In fact, they had even come up in the context of potential gainers from this year’s budget in an article yesterday. Choosing which one to buy among them depends on individual criteria.

They have similar earnings ratios and dividend yields, and their share prices are still making their way back up to pre-pandemic levels. 

I like PSN most based on these. It has the lowest earnings ratio of 13 times among all the FTSE 100 property developers. It also has a relatively high dividend yield of 4%. 

FTSE 250 property developers to consider

Among the FTSE 250 property developers, the answer is more obvious. Crest Nicholson has taken a bigger hit in 2020 and it showed a loss. It does not pay dividends either. 

By comparison, Bellway has managed to stay profitable. I find its dividend yield most attractive at 5%. This is the highest among all property developers I have talked about here. It also has the highest price-to-earnings (P/E) ratio of 20 times, though. 

Risks and takeaway for these UK shares

The upshot here is this — there are at least five real estate companies’ shares I can consider buying today. I think these UK shares’ long-term record and resilience through the corona-crisis goes in their favour. 

At the same time, I need to be cognizant that some of the demand is artificially inflated by policy support. While it could see them through the worst of the economic slowdown that could occur as the schemes are withdrawn, I do need to be realistic about some softening later in the year. 

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Manika Premsingh 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.