With UK house prices coming under pressure in recent months, I’m taking a closer look at the investment prospects of Barratt Developments Plc (LON:BDEV) (BDEV.L), Taylor Wimpey plc (LON:TW) (TW.L), Persimmon plc (LON:PSN) (PSN.L) and Berkeley Group Holdings PLC (LON:BKG) (BKG.L).
The prospects for the four companies are clearly closely tied to the UK economy. However, I feel that the outlook for the housing market remains positive. Interest rates are set to remain low, while there remains a fundamental undersupply of new housing.
For a housebuilder such as Barratt, its 5-star HBF rating means that it could enjoy sustainable growth at current levels, with it suggesting that customer satisfaction may remain high.
The company has also invested heavily in its land bank, which could provide it with high growth over the long run. With the Barratt share price having delivered a modest decline in recent months, it now has a dividend yield of over 7%, which I think makes it an attractive income option.
Persimmon’s balance sheet could help it to overcome potential challenges for UK house prices. The company has built up a £1.3 billion net cash position in recent years, and this means it could offer lower risk than some of its industry peers.
With the company having a generous capital return plan, I feel that it could prove to be a solid income stock over the medium term, with government policy helping to stabilise its financial performance.
Taylor Wimpey may also benefit from the government’s Help to Buy scheme, alongside SDLT relief. Both of these policies create additional demand for new homes, while restricted supply means that asking prices may move higher.
With Taylor Wimpey’s share price having a PE ratio of less than 11, the company seems to be in a strong position to deliver capital growth. For me, its positive EPS growth over the next couple of years suggests that it is not a value trap.
Berkeley Group’s focus on prime property means that it has a different outlook than some of its sector peers. The macroeconomic outlook for the UK may continue to be uncertain in the near term, and this could create volatility in its stock price.
Ultimately, though, Berkeley Group seems to have a solid strategy as well as a sound management team. This could help it to perform well even in difficult market conditions.