Housebuilders up on Help To Buy
City Index March 17, 2014 8:24 PM
<p>Housebuilders look set to continue enjoying strong trading conditions, if comments made on Sunday (16th March) by George Osborne are anything to go by. Mr […]</p>
Housebuilders look set to continue enjoying strong trading conditions, if comments made on Sunday (16th March) by George Osborne are anything to go by.
Mr Osborne announced that the government-backed loan scheme, which helps would-be homeowners (called Help To Buy), is sent to continue through to 2020.
The extension (the scheme was previously set to end in 2016) certainly bodes well for housebuilders. Recent news flow from those players highlights impressive performance and an upbeat outlook. That’s thanks to solid home buyer demand, partly driven by the Help To Buy scheme.
Potential near-term concerns have seemingly been allayed.
Meanwhile, recent concerns of a possible forthcoming slowdown in growth momentum as a result of an imminent end to the scheme seem to have been put at bay.
Those concerns have surfaced amid calls for the government to put an end to the scheme on the back of rising house prices in certain parts of the UK, which is helping fuel fears of a potential housing bubble.
So, it’s unsurprising that Sunday’s comments, which reinforce the current government’s commitment to the scheme, have helped lift shares in the sector.
At time of writing, shares of homebuilding-related companies are up. This includes: larger players Persimmon up around 4% and Barratt Developments up 2.9%; as well as Taylor Wimpey up 3%; Bovis Homes up 4.6% and Bellway up 2.2%.
Valuations have been on the rise
That’s thanks to a boost in the companies’ top-line and margins, which has invariably translated into the companies doling out cash to shareholders.
Indeed, they’ve all seen their share price soar notably over the last year or so.
Persimmon, for instance, has seen its share price rise around 55% over the last year alone, now trading just around 5% below its 2006 peak.
With that in mind, it could be argued that decent performance over the next few years has already been priced into the shares of these companies.
That argument is certainly of merit, but sustained growth, together with any potential for future additional cash hand-outs to shareholders, should offer the shares of these companies some support.
That said, the results of the looming elections could spur a dramatic change in sentiment. Yes, the potential impact of a new government – and any subsequent absence of commitment to the scheme – goes without saying.