Revenue and profit rocket!

Revenue for 2021 came in at just under £305m. That’s a jump of 48% on 2020. This makes sense given that everything came to a virtual standstill in the latter and Rightmove was required to offer discounts to estate agents. 

For this reason, it’s probably better to compare last year’s numbers with those achieved two years earlier. Tellingly, the former is up 5% on the pre-pandemic £289.3m achieved in 2019. In other words, Rightmove seems to be doing all the right things and getting customers to sign up for more products and package upgrades.

A similar pattern emerges when it comes to profit. Compared to 2020, underlying operating profit in 2021 was 67% higher (£226.1m). However, it was also 6% up on 2019.

Now none of this should really come as a surprise. After all, every prospective homeowner knows just how hot the UK property market has been. For evidence, the average UK house price hit £275,000 by the end of 2021.

The key question therefore, is whether it can continue.

More to come?

Thanks to ongoing innovation in its product offering, Rightmove thinks recent trading momentum is here to stay. That said, it does expect the number of transactions to slow as the housing market “normalises“. That seems infinitely prudent to me. 

Sure, a holding in the FTSE 100 member certainly isn’t without risk. The UK property market may easily go into reverse if the post-pandemic economic recovery stalls (perhaps due to high inflation). Even if the company is confident it won’t be “materially impacted by the property market cycle“, I’d still need to ensure I was sufficiently diversified, just in case. 

There’s also scope for the price to fall further if traders continue to shun growth stocks en masse. Despite today’s uplift, the share price is still down around 17% year-to-date.

An escalation of fighting in Eastern Europe, further news on rising prices and/or some other ‘known unknown’ could quickly erase today’s gains and send stocks crashing down again.

I wouldn’t like to be a trader right now. Thankfully, I’m far more Foolish than that. 

FTSE 100 market leader

I believe that quality counts for an awful lot when it comes to generating great returns over the long term. And, based on its fundamentals, Rightmove is very much a quality business.

Some of the numbers in today’s statement were truly mind-boggling. Property hunters spent an average of 1.5 billion minutes per month on the site in 2021. That’s up from 1.3 billion in 2020 and 1 billion two years ago. Site visits were also up 56% from 2019.

To me, the £6bn-cap has the sort of ‘economic moat’ that most businesses would kill for and Warren Buffett would likely approve of.

Yes, a valuation of 26 times forecast earnings before the market opened may look expensive, given current events. However, I think it’s a price worth paying. Considering its sky-high margins and a bulletproof balance sheet, Rightmove continues to look like a great candidate for a growth-focused portfolio like my own.

The post Here’s why this FTSE 100 growth stock is flying today appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Rightmove. 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.

Great in theory

Now, don’t get me wrong; the arguments for buy-to-let look pretty compelling on paper. The idea of someone paying my mortgage combined with the gradual (or perhaps not so gradual) rise in the property’s value is undeniably attractive.

The reality, of course, would be a lot different for me. The average cost of a house in the UK hit £255,000 at the end of December, according to Nationwide. That’s all well and good were I already invested. But becoming a landlord from scratch means I’d need a big deposit. The prospect of rising interest rates isn’t exactly appealing either. 

I also don’t feel I have time to find tenants who will consistently pay their rent (and not prove a nuisance), nor to keep the flat or house in good working order throughout the time I own it and abide by all the regulations imposed on landlords. So, I’m leaving buy-to-let to others.

A better source of passive income

To be frank, investing via the stock market appeals to me as it involves a lot less fuss. Assuming I’m comfortable with the sort of price volatility we’re experiencing right now, I simply need to buy and hold investments that deposit money in my account on a regular basis. In other words, I’m looking for shares and funds that pay dividends. And there’s no shortage of options that do just this. Given that I did once consider buy-to-let, however, it’s worth highlighting that some will allow me my property fix.

Real Estate Investment Trusts (or REITS) are companies that invest in and manage property portfolios. These could include residential homes, warehouses, self-storage facilities, healthcare buildings, office space and retail stores. The choice is staggering. And all allow me to become a landlord just through buying some shares. 

Another great thing about holding REITS (actually, any dividend stock) is that I don’t need to pay any tax on the passive income if I keep them in a Stocks and Shares ISA. This gives me more cash to reinvest and grow, assuming that’s what I choose to do. And over the long term, equities have consistently been the best-performing asset I can own.

Safety in numbers

Of course, it’s worth making it very clear that no passive income stream is ever guaranteed. A company may decide to suspend paying dividends if earnings hit a sticky patch. It may also refrain from increasing the payouts if it needs to pay for things that will allow the business to grow. 

One way of protecting myself from this eventuality is to hold a diversified bunch of shares and funds. This way, the pain caused by one company cutting its dividend can be mitigated by others perhaps increasing theirs. 

The post Buy-to-let? I’d buy stocks and shares for passive income instead! appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Share price low

First though, a look at what was previously behind falling investor confidence.

Lloyds has featured prominently in the news for some time now. The banking group made headlines back in June when it announced it would be closing 44 branches around the country. This came on top of the 56 branches Lloyds has previously said it would close in January 2020.

It doesn’t take a genius to work out why it would do this. Branches are expensive in terms of employees, rent and building maintenance. Younger generations prefer to bank online anyway so why would it keep ‘unviable’ branches open?

News of the closures might have been expected to have pushed the share price up, but both of these announcements happened to coincide with some other momentous news. The pandemic and a lawsuit. These two events unsurprisingly reversed the fortunes of the Lloyds share price and it has taken time to recover.

What’s bringing investors back to Lloyds?

Landlord Lloyds

I think what’s going on in the housing market is crucial here. House prices across the UK have skyrocketed over recent months and Lloyds announced back in August that it was aiming to buy over 50,000 homes across the country by 2030. It then plans to turn those homes into rental properties. It appears of these acquisitions are aimed exclusively at newly-built homes.

This could push up the Lloyds share price, but there’s an added twist to it.

The Bank of England announced yesterday that it expected to see a sharp rise in defaults over the coming months due to rising interest rates, the end of furlough and cuts to universal credit. While the economy may be opening up again and slowly recovering to pre-pandemic levels, large numbers of people have been left behind by the recovery. Some may be unable to repay their mortgages.

It just so happens that Lloyds is the largest mortgage lender in the country.

Conclusion

Lloyds could sell the homes it repossesses, or they could simply be added to its rental portfolio. Whichever it chooses to do, rising rents and rising house prices will be very profitable in the long term. And the UK’s chronic housing shortage means homes demand (and the mortgage market in which Lloyds is such a big player) remain buoyant. I believe that all of this is a big part of the Lloyds share price surge. 

Personally, I don’t think I can add Lloyds shares to my portfolio just yet. The market is already hyper competitive and I’m uncomfortable with the idea of a bank buying up newly-built homes around the country. For now, it’s a no from me.

The post Lloyds share price goes up 13% in six months, but I won’t be buying it appeared first on The Twelfth Magpie.

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James Reynolds holds no share mentioned. The Motley Fool UK has recommended 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.

A booming housing market has been good news for listed housebuilders, mortgage advisers and estate agents. And this is borne out by the latest full-year numbers from Purplebricks (LSE: PURP). But should investors like me be ready to take a stake in this growth stock? I’m not so sure… 

Rocketing earnings

Now, don’t get me wrong. The figures from the online estate agent were pretty encouraging.  Unsurprisingly, the number of instructions received by Purplebricks jumped higher, by 14%, to a little over 58,000 in the year to 30 April.

The average revenue per instruction received also increased by 7%. All told, this led the online estate agent to report a 13% rise in revenue to £90.9m. Adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) also rocketed 314% to £12m. 

On top of these numbers, Purplebricks said it would be launching a new pricing model this month, following a successful trial in the North West. Customers will be given the option of having their upfront fee reimbursed if they don’t sell their home.

However, since it’s too early to say how well this will be received, Purplebricks said it expected FY22 EBITDA would be flat year-on-year. This would be in accordance with what the market’s expecting. 

Unfortunately, the market doesn’t seem all that impressed with today’s news. Purplebricks’s shares were modestly lower in early trading.

Why might this be?

There could be a few reasons. For one, some investors may still be finding it hard to forgive the company for over-reaching itself in the early days by trying to capture overseas markets.

Yes, the share price is up almost 70% in the last 12 months as Covid-19 has been (almost) defeated. However, many small-cap growth stocks have experienced similar gains. Moreover, Purplebricks’ valuation is still 83% lower than where it was nearly four years ago. As a one-time holder, I’m just glad I departed with a profit back then. 

It’s also hard to say where the Purplebricks share price goes from here. Sure, there are things to be positive about. The UK housing market is hot and the new strategy could work. On top of this, Purplebricks’ finances also look pretty sound.

Following the sale of its Canadian business, it had £74m in cash at the end of the period. Like other firms, PURP has also repaid the furlough support it received (£1m) over the pandemic.

Against this, investors need to bear in mind the stamp duty holiday has now finished. Whether this leads to a fall in sales and a subsequent reversal in the housing market remains to be seen.

Regardless, CEO Vic Darvey’s goal of gaining market share and growing annual revenue by more than 20% in the medium-term won’t be easy. The environment in which Purplebricks operates remains highly competitive. Yes, effective marketing will help, but that comes at a cost.

Speaking of which, there’s also the opportunity cost for investors like me to consider. Why bet on a company that’s still to generate meaningful profits in an incredibly buoyant market when I can probably generate more-than-adequate returns for much less risk elsewhere?

Better options

Despite once being optimistic about its ability to truly disrupt a stale industry, I’m far warier of Purplebricks than I used to be. In my view, there are far more promising growth stocks to invest in. 

The post The UK housing market is booming, but I’d avoid this growth stock appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

That said, the reaction to today’s trading update isn’t quite so great. Why is this? And am I worried?

Rightmove in demand

First, the good news.

Today, the £5bn cap company said that demand for its services had been strong. Indeed, its platform had seen 10 of its busiest days ever since 13 May (when the government permitted agents and developers to reopen). Weekly email updates are receiving an average of 800,000 views and the number of properties being listed is also rising — up “over 10%” in the last week compared to this time last year.

In addition to this, the FTSE 100 constituent said that house sales in England were 10% higher than they were one year ago.  Of course, some of this may be down to deals finally completing after being on hold during lockdown.

So, why are the shares down?

There are a few likely reasons.

First, Rightmove did report a 3.8% fall in its membership base (to just over 19,000) since the end of 2019. It attributed this partly to agencies having cash flow problems as a result of the pandemic, although ‘traditional’ agents seemed to be weathering the coronavirus storm so far. 

Second, Rightmove announced today that it would continue to give discounts to agencies beyond the 75% offered from April to July. A 60% reduction will be given to customers in England in August, falling to 40% in September. Those in Wales, whose market reopened yesterday, will still get a 75% discount for August and 60% for September. Agents in Scotland are getting the same terms. Its market opens next Monday.  

While this should appease customers, it’s not ideal for Rightmove’s top line. Extending this support will likely hit revenue by £17m-£20m. This is on top of the £65m-£75m impact already predicted.

Third, the company’s ongoing unwillingness to provide guidance on its outlook for profits, while prudent, may also have frustrated some.

This decision, however, makes complete sense to me. It’s early days in terms of the recovery and we could still see markets fall should we get a second wave or the economic damage is worse than thought. House prices are already expected to fall 5% this year.

Happy holder

Rightmove’s shares are down by 3.5% as I type.

Not that this concerns me. Rightmove remains the clear leader in what it does with an 85% market share and, according to the company, over 50% more listings in the UK than any other source. That’s a powerful advantage that competitors have hitherto failed to erode.

Moreover, it seems the company is doing all it can to mitigate the impact of coronavirus on its finances. Despite having net cash on its balance sheet, management has taken salary cuts and a third of employees were furloughed back in April.

And even if we do get a second wave, Rightmove will be prepared. Its tool to help agents provide online viewing videos has already proved popular, as have advice webinars for both agents and house hunters.

Taking all the above into account, I’m happy to continue holding this quality business. I’ll even consider adding to my position should today’s fall mark the beginning of another period of volatility for the share price.

The post Top FTSE 100 stock Rightmove is down today. Here’s why I’d buy more appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Rightmove. The Motley Fool UK has recommended Rightmove. 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.

Once you wade through the waffle, however, it seems clear to me that this is one company that should still be avoided like the plague — and not simply because it was once a core holding for fallen fund manager Neil Woodford. 

Stable…for now

Revenue was very slightly up to £64.8m on a pro forma basis over the six months to Halloween, with almost three-quarters of this amount coming from the UK (and the remainder from the company’s operations in Canada).

This, however, couldn’t save the former market darling from swinging to an operating loss of £1.2m for the period. Once the impact of closing its businesses in Australia and the US are taken into account, a loss of £14.1m was recorded. 

As one might expect, attempts were made to accentuate the positive. Fairly meaningless numbers, such as the fact that Purplebricks had saved its customers over £150m in commission over the period, were highlighted. Relatively new CEO Vic Darvey also stated that management was “very pleased with the progress made” given the generally skittish housing market, adding that “diverse revenue streams” and 12% year-on-year growth in the average amount of money it is making per instruction had helped smooth things out.  

Remarking that the business is now “stabilised” is one thing, but I think the suggestion that Purplebricks is “enjoying profitable trading” is stretching things somewhat.

Cautionary tale

Today’s market reaction might not raise any eyebrows, but it’s worth reminding ourselves just how poor an investment the company has been lately. 

At the beginning of the year, Purplebricks’ shares were trading at 147p a pop. Go back to August 2017 and the very same stock was around 485p. As I type, the price is 104p.

Could this have all been foreseen? I think so.  

Purplebricks is a cautionary tale of what happens when companies try to grow too quickly. As mentioned quite a while ago, it’s risky expanding into new markets when you’re still attempting to verify the business model back home.

Indeed, this desire for growth at any cost is coming back to haunt the business and beginning to impact its balance sheet. At £41.6m, Purplebricks’ cash position at the end of October was 34% less than where it stood just six months earlier (£62.8m).

Not that management seems rattled, stating that it “remains confident” of hitting its medium-term target of holding a 10% share of the UK market. Personally, I’m struggling to see a catalyst for another purple patch that will be sufficient to raise it from the 4.1% share it held at the end of October. The company’s TV ads may have grabbed attention, but so too has the fact that it charges a fee to sellers even if it’s unable to shift their property. That might be a risk worth taking when the market is buoyant, but it becomes a significantly less attractive proposition in a Brexit-obsessed, recession-fearing UK.  

All told, today’s numbers haven’t changed my view on Purplebricks. I’d leave it to the traders and focus instead on finding quality businesses that can be held for decades.

The post Why I’m still avoiding this former Neil Woodford-approved growth stock appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Priced at 489p at the end of January, the very same stock now changes hands for over 70% less. Does this make it a bargain? Not yet, in my view. 

Vulnerable to Brexit

At first sight, the company’s strategy of doing everything possible to win market share appears to be working. As my Foolish colleague Kevin Godbold reported last week, revenue rocketed 75% to £70.1m over the first half of the financial year. Trouble is, operating losses rose by a higher percentage — 122% to be exact — to £25.6m. 

I sold my shares some time ago after becoming increasingly concerned by the pace at which the Solihull-based business was expanding overseas. While I understood management’s desire to capitalise on its first-mover advantage, I felt that the company needed to prove its business model closer to home first. I also became sceptical over its ability to withstand competition given that its pioneering low-fee approach is easily copied and could become the norm across the industry in time.   

Should Purplebricks reach a point where it is reporting consistent profits, I may become interested again. Having now trimmed the upper end of its revenue forecast for the current financial year to £165m-£175m from £165m-£185m on concerns over the impact of Brexit, however, I suspect this isn’t likely to happen for quite a while yet.

With a recent report from Rightmove stating that the average price of a home fell £10,000 over the last couple of months (the biggest such fall since 2012) I think there’s every chance that the shares could sink even further as market activity slows.

Wrong strategy

Frankie and Benny’s owner Restaurant Group (LSE: RTN) is another stock I’ll be distancing myself from next year. 

Like Purplebricks, the company’s share price has suffered over 2019 with a 33% reduction in value since the start of the year. Over a slightly longer period — since March 2015 — the shares are down almost 73%.

I can’t see things recovering any time soon, particularly following its decision to buy Wagamama. It may be an excellent brand, but I can’t help thinking that revitalising its other restaurants should be more of a priority for management than spinning yet another (large) plate. Since 40% of shareholders voted against the deal, it seems I’m not alone. 

Moreover, the acquisition has surely come at the wrong time. Dining out is a discretionary spend. In troubled times, it’s one of the first things to go. The fact that people already appear to be reining-in their spending as we approach our official date of departure from the EU (29 March) is an ominous sign for those operating in the highly-competitive restaurant sector. Indeed, accountancy firm Moore Stephens revealed yesterday that the number of insolvencies in the industry has increased by a quarter in 2018 (to 1,219) and is now at the highest level since it began following the sector in 2010. 

On a forecast price-to-earnings (P/E) ratio of nine for the next financial year and offering a tempting 6.7% yield based on the current share price, I can understand why some investors may be attracted to Restaurant Group. For me, however, it remains very much a value trap. 

The post Purplebricks isn’t the only heavy faller I’ll be avoiding like the plague in 2019 appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Of course, a deal may be signed between the UK and the EU, and this could lead to an improving performance for the UK economy. The reality, though, is that the UK housing market may struggle to generate the kind of growth that has been seen in the last 20 years. Rising interest rates, affordability issues, and political risks could mean that house price growth disappoints to some degree.

Changing economy

Assuming a Brexit deal is signed, interest rates are likely to rise at a brisk pace over the medium term. A Brexit deal could provide consumers and businesses with greater confidence in the UK’s economic outlook, and this may lead to a stronger economic performance. And with the rest of the world economy delivering high growth at the present time, the Bank of England may seek to cool inflationary pressure over the medium term.

As such, the availability and affordability of mortgages may decline. A higher interest rate would also make mortgage repayments less affordable, and this could prompt a slower rate of growth in house prices.

Cyclical events

Of course, no asset has ever risen in perpetuity. After two decades of growth, UK house prices may experience a period of difficulty, with the market having been boosted by favourable government policy in recent years. The Help to Buy scheme has allowed many first-time buyers to own their first property without having large deposits, while the stamp duty relief scheme may also be having a positive impact on house prices.

Given the precarious political outlook for the UK, policy change in housing would not be a major surprise. That’s especially the case since housing affordability is becoming a bigger political issue – particularly among younger voters who are struggling to get onto the property ladder. As such, the price rises which buy-to-let investors have become used to may be less impressive over the coming years.

Investment potential

While there’s a lack of supply of new homes, demand for them could come under pressure, due to rising interest rates and a change in government policy. As such, investing in a broader range of assets rather than property could be a wise move, since the risk/return ratio for buy-to-lets could be less appealing now than it has been for a number of years. And with tax changes coming into force, shares may offer a simpler and more profitable outlook.

Given that the FTSE 100 has a dividend yield of over 4%, and has recently experienced a pullback, it may offer good value for money for the long term. While potentially more volatile than house prices, ultimately it may generate higher returns in the long run.

The post When will the next great UK house price crash hit buy-to-let investors? appeared first on The Twelfth Magpie.

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Of course, higher inflation has itself been caused by weak sterling. Following the EU referendum, sterling has become one of the worst performing currencies across the developed world. This makes imports more expensive, and while retailers have done an excellent job thus far of absorbing those higher costs, eventually they are likely to run out of efficiencies they can make At that point, higher prices will become a reality for consumers, thereby increasing the rate of inflation.

Confidence remains high

In addition to higher levels of inflation, the UK economy is also performing much better than was forecast just after the referendum. Of course, Brexit hasn’t actually happened yet, but the confidence of consumers and businesses has remained relatively high. This could mean that the Bank of England is less easily able to justify interest rates being at historic lows, especially if inflation moves higher and there is pressure to cool off rapid price rises.

In such a situation, mortgage demand is likely to fall. Although many existing homeowners may have locked in a low rate for the next couple of years, higher mortgage rates will affect housing affordability for first time buyers. They have historically been the driving force behind the housing market and if they are suddenly only able to borrow 80% or 90% of what they can borrow at present due to higher debt servicing costs, it could mean that property prices fall.

The end of a winning streak

Furthermore, the UK property market is hardly cheap at the present time. Although supply is limited, the reality is that houses are almost as expensive relative to incomes as they were just prior to the credit crunch. Therefore, a correction may be required, just as was the case during the credit crunch, in order to bring houses down to a more realistic and justifiable value range. And with stamp duty rises on second homes, a lack of mortgage interest relief for higher earners over the next few years and a potential squeeze on the UK jobs market, a correction may be prolonged.

Already in London house prices have started to fall. It would be unsurprising if this gradually spread throughout the rest of the UK as the full effects of Brexit are felt. Added to the potential for higher inflation and higher interest rates is greater levels of uncertainty from Brexit. When combined with a lack of affordability, this could mean that house prices finally end their winning streak in 2017.

The post This could cause UK property prices to crash in 2017 appeared first on The Twelfth Magpie.

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• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

In the short term, the UK needs to put in place a new Prime Minister. This process is likely to take at least three months, as the Conservative party elects a new leader at their party conference — who may (or may not) then go on to call a General Election. Alongside this is uncertainty regarding the future of Scotland and to a lesser extent, Northern Ireland. Although the breakup of the UK may be unlikely, the mere possibility of it is likely to cause potential house-buyers to be put off.

A lengthy divorce

Once a new Prime Minister is in place, he or she must negotiate with the EU on the terms of the UK’s “divorce”. This will be a lengthy process and could see both sides play hardball with one another, thereby further increasing the uncertainty. Then, once the UK has left the EU, there will be another period of uncertainty as the UK goes it alone for the first time in over 40 years.

With the UK having been seen as stable from an economic and political standpoint, Brexit will create a fundamental shift in how foreign investors view the country. This is likely to mean reduced demand for London property, in particular, even though a weaker pound makes it more appealing from a currency perspective. As a result, overall demand for UK property may fall considerably in the coming years.

Furthermore, there is a good chance of rising interest rates. That’s because a weaker currency makes any economy more competitive due to its positive effect on exports. This could give the UK economy a boost and mean that rock-bottom interest rates are no longer necessary. And with the cost of imports rising due to a weaker currency, inflation may increase and mean that an interest rate hike is required to an even greater extent. Higher interest rates will mean that houses are even less affordable than is currently the case due to higher borrowing costs.

The only way is down

Of course, house prices have been unaffordable for many people for a number of years. The house-price-to-average-earnings ratio stands at its highest level since the start of the credit crunch, which indicates that a fall is on the cards, even without the effects of Brexit. And if prices do start to fall then many people are likely to wait for even lower prices, with it becoming a snowball effect which could take place at a faster pace than many investors are currently anticipating.

So, while house prices have performed well in the last 25 years or so, they now look set to endure a lost decade. Combined with the negative effects of higher stamp duty on second homes and the lack of higher rate mortgage relief, there seems to be little reason for them to go anywhere but down.

The post Is Brexit the start of a lost decade for house prices? appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.