David Ritchie, the Chief Executive of Bovis Homes Group PLC said:It goes on.
"The Group has performed well in the first half of 2013 with a significant further improvement in housing profit, delivered from the ongoing successful execution of the Group's growth strategy. Trading in the first half of 2013 has been strong and the Group has achieved a 40% increase in private reservations compared to the same period in 2012. Continuing its success in the land market, the Group has added 2,767 new consented plots to the land bank. With the positive progress in executing its growth strategy, the Group is well positioned to deliver higher shareholder returns."
Market conditions
Even though the general economic background remains challenging, the housing market has shown signs of strong improvement. Consumers are increasingly able to access mortgage finance and the launch of the Help to Buy shared equity scheme, replacing FirstBuy, has had a positive effect on customers' confidence to buy a home and their ability to transact. These positive effects are expected to support greater activity in the new homes market, which in turn will provide an impetus to the number of new homes built. The Group continues to view positively the Government's initiatives to support the housebuilding sector.http://www.digitallook.com/news/rns/21012367-11178/BVS-Trading_update_html
Of course it does. How can any company not be thankful that the Government is potentially poring billions of pounds in taxpayer money its way? Supposedly this is to kick start a market that hadn't really seen a big fall after the financial crisis set in, but in reality was effectively dying a death from inactivity because of what happened before the financial crash.
Outside of London and parts of the South, the housing market has been largely stagnating since the financial crash. Politicians, bankers and the VI's of the housing industry have failed to grasp that prior to 2007, house prices went up not just on loose lending, but also the growth in widely abused, open to fraud self-certification and fast track mortgages which the banks routinely approved and did not check the income claimed by buyers or their mortgage broker. Once these products were removed post crisis and the banks went back to more traditional mortgage products and lending practices, people clearly couldn't afford to buy. It's a scandal that has largely been covered up by simply turning a blind eye to it. A too big to address scandal because no politician wants to be seen as campaigning to have home owners rounded up for lying about their income. It was a white lie fraud that many were probably doing and certainly mortgage brokers were happy to go along with and promote.
So, why no big fall in house prices post 2008? Well, an indirect consequence of the Government and BoE action to save the economy from depression by rescuing Britain's effectively bankrupt banking system meant that the conditions that would normally result in a house price crash were avoided. Banks and businesses going bust, people losing their job, mass unemployment, negative equity, etc. Instead, we had stagnation, prices still too high for those priced out to get on the ladder and sellers having no reason to sell at a much reduced level.
QE has been very good at maintaining and reflating the asset bubble housing market. Unfortunately, it cannot solve the crisis of affordability as by design its goal is to maintain prices at what had become an unaffordable level once bank's lending criteria had been tightened up.
Enter the Government, with its latest scheme to "help" people get on the ladder or move up with Help to Buy. Initially to run for around 3 years, it may cost billions, but fortunately for the Government it is money that is conveniently off balance sheet, so it is apparently affordable at a time when they are desperate to make cutbacks to current spending in order to supposedly balance the budget.
Last week it was reported that UK house prices were on the up again and it's not difficult to see that as Help to Buy gains in popularity, and all of Britain's stock market quoted house building companies are reporting that interest in buying has gone up since the measure was introduced, there has to be the risk of a knock on effect that pushes prices higher and further out of reach.
Labour warned that home ownership was moving further out of reach for struggling first-time buyers and laid part of the blame on the chancellor,George Osborne, saying the Help to Buy schemes announced in his March budget were fuelling the rise in property values. Shadow housing minister Jack Dromey said: "The IMF, Office of Budget Responsibility and the Treasury select committee have all warned that the government's Help to Buy scheme will push up house prices but have limited impact on increasing badly needed affordable house building."
http://www.guardian.co.uk/business/2013/jul/05/help-t-buy-scheme-fuelling-housing-bubbleWell, that's big of the Labour opposition, the hypocrites that resided over the largest increase in house prices ever seen in the UK and who totally closed their eyes and ears to what the banks were doing and all the fraud that went on prior to the financial crash when they were in power. Oh, and they did little to nothing themselves to create any affordable housing anyway when they had the chance, but don't let the facts get in the way of the need to attack Government now that they are in opposition.
Last week, Taylor Wimpey's CEO Pete Redfern was honest enough to warn that there might be a sting in the tail of Help to Buy.
"As a business, we want a stable market. We had weaknesses in the previous cycle that we've now dealt with, and the company is now on a strong footing. The last thing we want is a bumper 18 months that then falls away. Help to Buy managed well can help – but Help to Buy managed badly could be a problem. The substance is good, but there is risk in the management."
He says both Sir Mervyn and the IMF are "right to be nervous about dependence". "We should not get ourselves where the US has got itself with Fannie Mae and Freddie Mac where government support is built in," he says. "The point of principle is that there has to be an exit route."
He adds: "Where I would agree with the concerns is if successive governments find it too difficult politically to exit – that's where there is a genuine hazard.http://www.telegraph.co.uk/finance/financetopics/profiles/10151432/Monday-Interview-Pete-Redfern-has-rebuilt-Taylor-Wimpey-he-doesnt-want-another-bubble.html
He doesn't currently see the possibility of another bubble, but without assistance like Help to Buy, most people are struggling to buy because the last bubble hasn't been allowed to deflate.
Therein lies the problem of any Government exit strategy with Help to Buy. What happens when the date gets closer to it ending? A mad rush to get in before it ends, resulting in higher prices? People not wanting to miss out? Chances are that as the date gets closer, the housing market VI's will be out, cap in hand to whichever Government is in power, warning of the dangers of what will happen to the market if the scheme ends. Fact is, the chances are that it will become permanent in one form or another, because dependence upon it is already there as long as house prices aren't allowed to fall to levels at which people can actually afford to buy given banks current lending criteria and the economic backdrop. In other words, a free market. But since when has the UK housing market been free? It's usually "free" when prices are rising, but not for long at the hint of a fall.
The irony here is that we have a Government trying to save money by introducing all manner of new measures to reduce the cost of housing benefit to mostly the worst off in society, yet they seem quite happy to fund billions to the better off to buy houses. It would seem we have a new form of housing benefit in place that politicians feel is ok because it "helps" people to buy a home and of course props up the market.
Not only that, it is a housing benefit to the construction companies that build houses and that is why it is difficult not to be bullish about them going forward. On fundamentals many looked stretched, but how can they not make money out of Help to Buy in the next two years at least? It's easy to see a bubble in construction company shares building up over the next few years.
Today so far.
Bovis +5.5%
Taylor Wimpey +4.3%
BDEV +4.1%
Crest Nicholson +3.7%
No comments:
Post a Comment