Housebuilding stocks proved to be some of the most profitable UK shares to buy during the 2010s. Back then, a blend of ultra-low interest rates, the government’s Help to Buy initiative, and a shortage of properties helped drive home prices through the roof and turbocharged demand for newbuild properties.
It’s my opinion that the outlook for these types of UK construction stocks remains extremely bright. It’s why I continue to hold Taylor Wimpey and Barratt Developments in my own shares portfolio. Here are three more stocks I’d buy in expectations of making handsome returns this decade.
A FTSE 100 firework
Sticking with the housebuilders, The Berkeley Group Holdings is a FTSE 100 stock I’m looking at closely. I like its focus on the wealthier UK areas of London and the South East, regions where house prices have been growing strongly recently. According to estate agent Knight Frank, premium property prices in the capital are rising at their fastest pace since 2015.
Berkeley warned in September that a mix of Brexit and Covid-19 turbulence is driving costs higher. However, the prospect of strong and sustained house price growth would still encourage me to buy the FTSE 100 builder today. The eternal popularity of London as a living destination provides me as an investor with great comfort.
Expanding for growth
The Bank of England is tipped to raise interest in the months ahead as inflation booms. This has the capacity to dent homebuyer activity as affordability comes a bigger issue. But will rate rises be enough to hit demand hard? I have my doubts. In recent days, Lloyds Bank said it expects base rates to average 0.5% between now and 2025.
I therefore expect trade at Mortgage Advice Bureau to remain rock solid. Latest financials showed revenues leap 46% and 52% in the first half of 2021 from the corresponding 2020 and 2019 periods respectively.
Competition in its industry is intense but I’m confident that rapid expansion should still allow it to enjoy blistering profits growth. Mortgage Advice Bureau grew its adviser count by 7% between June and last December.
A UK share I also own
The favourable outlook for homes demand means that housebuilders are taking steps to ramp up production rates. This bodes well for Ibstock, a company I also own in my stocks portfolio. This particular UK share manufactures bricks and advised last week that “robust demand [continues] across both the housebuilding and RMI markets.”
As a shareholder, I’m also encouraged by its plans to embrace the green agenda. In recent days it announced plans to build the UK’s first automated brick slips manufacturing factory for £50m. Demand for this sort of energy-efficient cladding is tipped to boom as the climate emergency comes under increased focus.
I think Ibstock is a top buy despite the threat of fresh production problems that could hit brick production and consequently revenues.
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Royston Wild owns shares of Barratt Developments, Ibstock, and Taylor Wimpey. The Motley Fool UK has recommended Ibstock and Lloyds Banking Group. 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.
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