We are seemingly getting closer and closer to the end of lockdown. For most businesses, it has been a major hit to their economic situation. This is why I am on the lookout for encouraging signs. Last week Taylor Wimpey (LSE: LON:TW) hinted at some such positivity.
As to whether Taylor Wimpey shares will continue to rise – that is difficult to determine. We don’t know yet what kind of impact the lockdown will have on the economy.
Taylor Wimpey shares on the rise On Friday, the housebuilder gave some positive signs for the industry. It said it was now seeing more “sustained demand”. Specifically, it has seen sales rates, website visits, and customer appointments all increase. It is no surprise then that as I write this, Taylor Wimpey shares are up almost 5% on the day.
Interestingly, Taylor Wimpey shares have been on the rise since lockdown for the sector ended a few weeks ago. I say interestingly because any bounce back in the housing market is far from certain.
In the week to the end of May, the company said it saw bookings to view houses jump threefold, while traffic to its website increased 32%. Though, as CEO Pete Redfern said the market “will take weeks or months to get back to full normality”.
I think this statement is really only true under one condition – that the UK economy doesn’t go into recession. Unfortunately, I think it may be too early to tell if this will be the case or not.
Bad times ahead? There are of course, strong arguments to suggest a recession is possible. Businesses across the board have been hit by lockdown. Despite government efforts to keep the worst of it at bay, we really don’t know yet if they have been successful.
If a recession does hit, the property sector could be one of the worse affected. People without jobs don’t buy new houses. The normal tool for helping us out of recession is of course low interest rates. At 0.1% there is not much room for the Bank of England to move.
It is also worth noting that house prices were flat, if not declining, before the coronavirus hit. If the market was soft before the troubles, I doubt it will be strong after them.
As a potential investment though, Taylor Wimpey shares may still offer some opportunity. One could argue that lockdown made them artificially low compared to even a normal, weak market.
Even having bounced from recent lows, at 170p Taylor Wimpey shares are about 30% lower than they were before lockdown. I suspect there is some immediate upside that could be had, deepening on the broader news surrounding lockdown.
That said, as an investment for a year or two, I see a lot of risk. Taylor Wimpey shares may well continue their rise for the next month or so, but who knows what will come when the full consequences of lockdown become apparent.
The post Do I think Taylor Wimpey shares will continue their rise? appeared first on The Motley Fool UK.
Karl 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.
Motley Fool UK 2020
First published on The Motley Fool
