Help to Buy, the new housing benefit?

Bovis Homes reported today, following on from a number of trading statements towards the end of last week from other house builders and as expected the news was good.

David Ritchie, the Chief Executive of Bovis Homes Group PLC said:

"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."

It goes on.

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.

Bovis Homes, IMS confirms more buying interest thanks to Government help

Following on the theme set out here that UK house prices cannot be allowed to fall by any significant level, it has been interesting to read the management reports of market quoted companies like Taylor Wimpey, Barratt, etc as to any pick up in business since the Government announced its intention to help prop up the market in the last budget. Today Bovis Homes reported and they basically confirm what we already should know by now, that house building construction should continue its bullish trend going forward.

They reported;

David Ritchie, Chief Executive, commented:

"The ongoing success of the Group's growth strategy has driven strong trading in early 2013.  Homebuyer sentiment has been improving and, with the recently announced Government initiatives, sales rates have increased ahead of management's expectations.  The increased number of active sales outlets in excellent locations, delivered from the Group's assertive land buying over the last few years, provides a great opportunity to take advantage of the improving market backdrop and further strengthen shareholder returns."

Current trading

Trading in the 19 weeks to 10 May 2013 has been strong with the Group achieving 989 private net reservations (2012: 783), a 26% increase year on year.  This has been driven by an 11% increase in the average number of active sales outlets to 91 (2012: 82), and a 14% improvement in the average private sales rate to 0.57 net reservations per site per week (2012: 0.50).  The number of visitors to the Group's sites has increased by 29% in the year to date compared to the same period last year.

http://www.digitallook.com/news/rns/20899760-11178/BVS-Interim_Management_Statement_html

Valuations of these companies may well be stretched already, but momentum is with it and the sector is likely to remain bullish given the size of Government intervention. It is unlikely that Government will do anything to harm this sentiment given the importance of the home owning/desire for ownership vote that exists in the UK. Regardless of who the Government is, they are likely to throw taxpayer money at the housing sector if at any stage prices look to be lagging or demand is down because people can't afford to buy because prices are too high. Their answer to high prices is always to provide subsidies to buyers, I doubt that will end any time soon.