The coronavirus has negatively impacted a lot of industries. One of these has been the property sector. For those looking to move, it was impossible to have physical viewings for months. The government actually warned against moving during parts of the pandemic. For investors, property prices didn’t offer any better news. Nationwide reported prices falling the most in May since 2009, at a 1.7% drop. Naturally this took a toll on the revenues of any firm involved in the property space, including Rightmove (LSE: RMV) and its share price. So why buy now?
A turning tide
We all know how quickly things can change, as seen in March. On the flip-side, it doesn’t take much for positive change to come into effect. The first sign of encouragement for Rightmove was the announcement on a stamp duty holiday. The Chancellor gave the green light a month ago for no stamp duty to be paid on the first £500k of a property price. This has encouraged buyers to come back to the market, given that it would save around £15k for a £500k property.
The second positive change that will help the Rightmove share price is the easing of restrictions from the coronavirus. How can you move house or view a new house if you are told to stay within your own home for safety? But with the UK registering fewer than 1,000 new cases a day since July 15, restrictions have been eased. Hence the housing market springing back into action.
Boosting the Rightmove share price
Rightmove is an online portal where estate agents list properties. It relies on internet traffic and agents advertising on the portal. Before the tide turned, the share price was falling as investors realised the business would see a slowdown. This was confirmed with its results for the first half of the year. Average revenue per advertiser fell 34%, and there was a similar move lower on overall revenue and profit.
Those figures were through to the end of June,but I expect the next half to be a different story. Rightmove commented that it’s seeing a lot of pent-up demand. Its CEO said “it’s quite incredible that 65 of our record days have been since 13 May”.
I’m not going to claim that the property market (and therefore the Rightmove share price) is going to be the best performing sector over the next year, but I do think it’ll be up there. As a starting point, a bounce-back in revenue for Rightmove should put the share price back close to where it was before the virus. This would return around 12% from current levels.
From there, the share price can resume the growth stock performance we’ve seen over the past few years. In case anyone has forgotten, it has gained over 1,000% in the past 10 years. It was only the virus that put a brake on performance. So from my point of view, this is a great time to buy into the Rightmove share price and ride the wave back higher.Â