The government’s Help to Buy scheme has been a great help for some people. In places like the north of England it has allowed first-time buyers to get a foothold on the property ladder.
But the biggest beneficiaries have undoubtedly been the house-building companies, lenders, estate agents and surveyors.
Yet it seems that the stockmarket thinks that the good times are over for for this property company. The shares have slumped by over a third since late February and are now close to their 52-week low.
Investors have had a special dividend after the company made a profit from its investment in property website Zoopla and seem to think that the easy money has been made. And it’s not hard to see why.
Estate agencies have a lot of fixed costs that need to be paid for, in the form of their staff and high-street offices. They make plenty of money when the housing market is booming – as it has been for the last 18 months – and they are selling lots of houses, but may go bust when the market slumps.
With mortgage lenders now being less generous with their money, investors are fretting that activity in the housing market will fall back.
Estate agents have also benefited from the boom in buy-to-let properties, by looking after landlords’ properties in return for a slice of the rental income.
With the lettings market also cooling, this could mean less money all round for the likes of LSL Property Services (LSE: LSL), which make their money from estate agencies and surveying services.
It’s true the housing market may go into a slump. And the future of high-street estate agents is uncertain. That said, if the gloom is misplaced and profits can be kept around their current £50m, then the shares may be cheap. They would be on a price-to-earnings ratio of 9.4 times, offering a dividend yield of 4.6%.
Verdict: a risky buy