Readers Question: Which businesses are likely to benefit from a recovery in the housing market?
I think it is a little premature to talk of a recovery in the housing market. But, nevertheless when there is a recovery in the housing market the following firms will benefit.
- House Builders. At the moment there is a surplus of unsold houses. This is contributing to falling profitability for many large homebuilders. A recovery in the housing market would benefit these firms very significantly.
- Mortgage Lenders. The Council of Mortgage Lenders in the UK have reported a significant drop in mortgage lending. This reduces the profitability of banks and building societies who lend money to potential home buyers. An upturn in the housing market would increase demand for mortgage products enabling profitable mortgage loans to be made. If conditions in the housing market improved, mortgage lenders would see an additional benefit of declining mortgage defaults which has been causing significant losses to mortgage lenders and banks who bought the securitisation products.
- Estate Agents. Estate agents benefit from the number of transactions and the value home sales. An upturn would increase the number of house sales and increase the value of houses meaning that their % share would improve.