Could surging house prices be good news for the Lloyds share price?
See all posts by Rupert Hargreaves Rupert Hargreaves | Monday, 17th August, 2020 | More on: LLOY Image source: Getty Images. The Lloyds (LSE: LLOY) share price has plunged in value this year. Investor sentiment towards the lender has crumbled as the coronavirus crisis has wreaked havoc on the UK economy. As one of the largest banks in the country, the crisis may have a significant impact on Lloyds.Indeed, the company has already announced it may have to write off billions of pounds worth of loans as businesses across the country collapse. However, the booming housing market could offset some of this downturn. As such, rising home prices may be good news for the Lloyds share price.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Good news for the Lloyds share priceAt the end of July, Lloyds made a stunning announcement. The bank said that it plans to lose between £4.5bn and £5.5bn this year due to bad loans. This projection was based on the group’s UK economic forecasts for the rest of 2020.These projections suggested UK GDP will fall 10%, unemployment will hit 7.2%, and house prices will fall by 6% this year. In its worst-case scenario, Lloyds projected a double-digit decline in property prices for the year. As the largest mortgage provider in the country, falling property prices may have a more considerable impact on Lloyds than any other bank. Luckily, the property market seems to be holding up quite well.This could be good news for the Lloyds share price. Buoyed by the chancellor’s stamp duty holiday, low-interest rates and pent-up demand, home prices in the UK have surged over the past few weeks.According to property portal Rightmove, the number of transactions on its platform has hit a 10-year high. Some figures suggest these factors have added as much as £30,000 to the average property price. A recent report indicated that before the lockdown, the average property in the UK cost £260,000. It’s now £290,000. This performance suggests Lloyds’ downbeat assessment of the UK economy might have been too pessimistic. Clearly, there are risks ahead for the UK economy. Rising unemployment and a second wave of coronavirus could send property prices crashing.Still, a better-than-expected economic performance could have a positive impact on the Lloyds share price. Investors currently seem to be considering the worst-case scenario for the bank. Cheap sharesThe Lloyds share price is currently trading at a price-to-book (P/B) value of just 0.4. That’s compared to the UK financial sector average of 0.6. These numbers suggest the lender’s share price is undervalued by around 50%. As such, it could offer a wide margin of safety at current levels. Therefore, if the UK economy performs better than expected over the next few months, the Lloyds share price may have the potential to produce large capital returns for investors.What’s more, the bank has historically paid significant dividends to investors. It’s currently prevented from doing so by regulators, but this could change in the coming months. If it does, the Lloyds share price has the potential to offer a dividend yield of 8%, based on historical trends.These numbers suggest the Lloyds share price has the potential to produce substantial total returns in the years ahead. As such, it may be worth buying as part of a well-diversified portfolio today. “This Stock Could Be Like Buying Amazon in 1997” Rupert Hargreaves owns 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. Enter Your Email Address Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Our 6 ‘Best Buys Now’ Shares Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Could surging house prices be good news for the Lloyds share price? I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Simply click below to discover how you can take advantage of this.