Housing stock As buyer confidence slips, will builders be left out in the cold? 2
010 started so well for house builders. The early part of the year saw many of the Stock Exchange listed builders returning to profit, and reinstating their suspended
dividends; and so far, their results have been good, benefiting not only from the recovery of the housing market, but from tight cost control. For instance, Taylor Wimpey said
recently that its profit for the year will be at the top end of market expectations. The company has managed to negotiate a new £950m credit facility, its high debt was one of the things analysts were concerned about, and its US house building operations, which had been hit hard in previous years by the US downturn, have now stabilized. In October, Bellway announced its
preliminary figures for the financial year, upping the final dividend from 6p to 6.7p. The results showed an impressive turnaround from a £37m loss to a £44m profit, though it’s not quite as impressive
18 JANUARY 2011 PROPERTYdrum
when you find out that it reflects a £66m write-down of the land bank that was taken last year. Even adjusting for the write-down, though, an improvement in profit from £29m to £44m is far from derisory.
ConfidenCe slipping Yet in the management statement attached to the figures, Bellway said purchasers’ confidence was “slipping away”. And despite the apparently excellent figures that the house builders were coming out with,
their share prices were heading south. Something had clearly gone wrong. Almost all the quoted house builders
Our profit for the year will be at the
top end of market expectations.’
came out with relatively downbeat management statements this November, despite continuing growth in profits. Galliford Try, for instance, remained cautious about prospects despite 14 per cent growth in its sales, and that was real growth, not a shift in geography or product mix. Redrow, which saw its average price up 16 per cent as it refocused on more expensive homes, was equally unenthusiastic about the market; chairman Steve Morgan let rip at the Government and the FSA for suppressing demand for housing by over-regulating mortgage availability. Meanwhile Bovis, which returned to
the black in the first half, said in November that it had seen sales up 14 per cent in the year so far, despite an increase in its average prices of only three per cent. But at the same time, it described the market as “challenging”. And Barratt, which cut its
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