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Highlight
- According to Halifax, average UK property price currently stands at £261,221, an increase of 0.4% in July, with Wales registering the highest rise of 13.8%, and London the lowest at 2.5%.
- The UK house prices are currently about 7.6% higher compared to the same period in 2020
UK house prices are currently about 7.6% higher compared to the same period in 2020, as per data from Halifax. However, the housing market is expected to cool down as the annual house price rise declined from 8.7% in June due to ending of stamp duty holiday extension and shortage of available homes. The tax beak and the growing demand for housing created a stir during the COVID-19 pandemic.
The stamp duty holiday was a strong catalyst for people to complete house purchases before the end of June, especially in the case of premium-priced properties. Rising demand for housing during the pandemic was attributable to high demand for larger homes to live and work. Thus, housing sales in the country hit record highs during the pandemic, with sales of large properties surging.
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The stamp duty holiday exempted tax on the first £500,000 of the purchase price between July 2020 and June 2021 impacted house prices. Zoopla’s July house price index predicts prices to witness an uptick to around 6% in the coming period led by tax break, prior to finally settling back to 4%-5%.
Here we take a look at two FTSE AIM listed housing stocks that offered high returns to shareholders over the last one year.
Redrow Plc (LON: RDW)
Redrow is one of the UK’s largest housebuilding companies that operates through a network of 14 operational divisions. Redrow expects turnover for the year ended 27 June 2021 to reach £1.94 billion compared to £1.34 billion in 2020 and £2.11 billion in 2019, on legal completions of 5,620 in 2021 (2020: 4,032, 2019: 6,443), and operating margin of over 15.5% (2020: 11.1%, 2019: 19.5%).
Ongoing strong housing demand along with the stamp duty holiday led better than expected performance in homes turnover in the regional businesses. Earlier, in June 2021, the Group managed to complete the final phase of a PRS sector scheme before the schedule, adding around £43 million to turnover in the 2021. In the same month, the company sold the final two London sites it decided not to build. Regional businesses, including the new Southern division would be benefited with the proceeds of these deals in the form of reinvestment into them. At the year-end net cash balance stands at £160 million compared to net debt of £126 million in 2020 and the average monthly cash balance was £142 million compared to £2 million in 2020.
As of 13 August 2021, shares of Redrow gave one year returns of 48.34 per cent, and its market cap stood at £2,293.46 million.
Foxtons Group Plc (LON: FOXT)
Foxtons Group is a UK-based real estate agency company engaged in both lettings and sales. For the half year ended 30 June 2021, group revenue stood at £66.9 million, an increase of 66 per cent compared to £40.4 million in the same period in 2020. The group’s adjusted operating profit of £5.2 million in six months ended 30 June 2021 compared to £2.4 million loss for the same period in 2020, driven by D&G's acquisition in March.
Foxtons’ net cash stood at £24.4 million as of 30 June 2021 (31 December 2020: £37.0m), post a £2.7 million share buyback and £10.0 million net cash consideration for D&G in March 2021. It declared an interim dividend of 0.18p and £3m share buyback program on 29 July 2021, to return excess capital to shareholders post strong trading performance during the period.
As of 13 August 2021, shares of Foxtons gave one year returns of 55.31 per cent, and its market cap stood at £185.32 million.
Way ahead
Housing price rise in the UK was primarily driven by the stamp duty reduction, a pandemic period initiative of the government to boost housing sales and buyer confidence through the pandemic. Additionally, as interest rates remained low, house prices were rising and thus are anticipated to taper down in coming months once all the government support are finally over.