Take a quick look at the latest buy-to-let lending figures and one could be forgiven for thinking that trying conditions for landlords could finally be easing.
Data from UK Finance released late last week showed that some 5,100 mortgages for buy-to-let purchase were signed off in April, matching the number that completed in the same month in 2018. Not exciting, sure, but cause for huge relief when you consider that, by comparison, the number of completed mortgages plummeted 9.1% in March to 5,000.
The government’s decision to delay the scheduled Brexit withdrawal date to October 31 has boosted buyer activity across the homes market, and undoubtedly this has fed through to improved appetite from landlords too. The recent uptick in April, therefore, is not a suggestion that things have got any easier for buy-to-let investors.
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If anything, conditions appear to be getting more and more difficult for participants in this particular asset class. This month alone saw the implementation of the Tenant Fees Act that transfers a whole host of costs from renters to landlords, and adds to the financial pressures created by axed tax relief, vast stamp duty bills and more and more regulation.
Strength across the board
Barratt Developments (LSE: BDEV) is a property stock I myself have been happier to indulge in than buy-to-let. Its share price performance may have been rocky since I bought in, but I remain convinced that the UK’s yawning home supply shortage will still have made it a lucrative share to have bought when I look back a decade from now.
I think that now in particular is a great time to load up on the housebuilder ahead of fresh trading details slated for July 10. Industry conditions have continued to be favourable for the FTSE 100 business — just last month it declared that the outlook for 2019 was “modestly ahead of our previous expectations” following what it described as a “strong” start to the year — and trading data from some of its rivals since then has also been quite pleasing.
The latest report from Bellway last week, for instance, showed that the business enjoyed “strong sales” during the four-and-a-bit months to June 2. In this period the company saw its reservation rate improve almost 5% to 244 properties per week, up from 233 in 2018, while its forward order book improved some 3% to 6,312 homes.
What’s more, in an update of its own, Crest Nicholson declared that revenues rose 7% in the six months ending April to £501.9m.
8%+ dividend yields
Reflecting this stable backcloth, City analysts expect Barratt to keep growing earnings despite rising costs and the broader problem of political and economic uncertainty.
Rises of 5% and 2% are anticipated for the years to June 2019 and 2020 respectively, leading to predictions of more dividend growth as well. Thus the Footsie firm carries gigantic yields of 8.1% and 8.2% for this year and next. These giant figures are not the only reason to celebrate, though, as right now Barratt packs some terrific value as well relative to its growth prospects, the firm sporting a forward P/E ratio of 8 times.
I think Barratt (or indeed any of the homebuilders) is a great way of making big bucks from the property sector in the years ahead, and a superior way to use your hard-earned investment cash than buy-to-let.
