Of all Margaret Thatchers achievements, I think her idea that people should own their own homes ranks alongside monetarism as one of her best. If you buy houses, youre automatically building a store of wealth for you, your family and your descendants. Its the reason why, per capita, the UK is one of the wealthiest nationsin the world.
House price boom
The downside ofthis is that, if everyone is buying property, not just as a roof over theirhead but to let out and as an investment, prices are inevitably going to rocket. This has divided Britain into a nation of haves and have-nots: thosewho own property, and those who rent.
House prices fell during the Great Recession, but are now recovering strongly. The dinner party conversation has moved from being about whether property prices will rise, to just how far theyll go, and how unaffordable they are. I think they have quite some way further to rise. Thats good news for the haves, not so good for the have-nots.
But this burgeoning market means that housebuilders such as Barratt Developments (LSE: BDEV), Persimmon (LSE: PSN) and Berkeley Group (LSE: BKG) have been raking it in. And their share prices have been heading skyward.
You may be kicking yourself for not buying into these companies during the dark days of the Credit Crunch (I certainly am), when they were ridiculously cheap and nobody would touch them with a barge pole. But with house prices set to rise much further, youll kick yourself even more as I suspect the profitability of these firms, and theirshare prices, will increase too.
Building growth
A swift assessment of earnings growth shows why these businesses should be of interest to you. Lets start with Barratt Developments. Earnings per share are expected to shoot upfrom 7.5p in 2013 to 58.55p in 2017. The 2016 P/E ratio is forecast to be 11.68, falling to 10.69 in 2017, with a dividend yield of 4.89%, rising to an impressive 5.96% the following year. Thus thegathering momentum means this company is still cheap, and has an attractive dividend yield to boot.
Persimmon has a similar progression, with earnings in 2012 of 54.90p per sharelikely to surgeto 173.69pper sharein 2016. For this builder, the 2015 P/E ratio is expected to be 12.92, falling to 11.67 in 2016,with an income of 4.69% rising to 5.28%.
While Barratt and Persimmon have developments all across the country, the appeal of Berkeley is that much of its business is in theresurgent London and the South East. Thats why its share price has pushed a little further ahead of its peers. Analysts think earnings per share will go from 140.30p in 2013 to 370.26p in 2017. The forecast 2016 P/E ratio is 15.99, falling to 9.96 in 2017, with a dividend yield of 5.42%.
The bottom line is that theres a lot further to go in this housing boom. Though you may not have got on at the ground floor, its still worth buying into any of these building firms as theyclimb higherin 2016.
All three of these companies are ones to tuck away in your portfolio and are set to yield dividends and share price increases for years to come. If you’re interested in dividend share opportunities, then our experts at the Fool have unearthed a little known firm that’s worth a much closer look. It’s good value, high-yielding, and a growing business.
Want to learn more? Well, just click on this link to read A Top Income Share From The Motley Fooland it will be dispatched instantlyto your inbox, completely free and without obligation.
Prabhat Sakya has no position in any shares mentioned. The Motley Fool UK has recommended Berkeley Group Holdings. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
