News Column

There's still plenty of time to build on this bull run

July 8, 2014

JULIAN HARRIS



CRITICS of the government's Help-to-Buy programme, which is often accused of doping up already-too-high house prices, sometimes refer to it as "Help-to-Sell".


The scheme, which either backs up or even contributes to mortgages, is certainly helping housebuilders to sell a few more properties and thus bolster their earnings.


Such fortunes are reflected clearly in the stock prices of these firms. Shares in Persimmon and Barratt Homes are up more than 40 per cent since chancellor George Osborne first announced Help-to-Buy, while Galliford Try and Taylor Wimpey are up nearly 30 per cent. Berkeley has risen more than 20 per cent and Bovis Homes nearly 11 per cent. You get the picture.


Admittedly, this is not entirely due to Help-to-Buy. Shares were on the rise before last year's Budget and fundamentals for the sector - a growing economy, prices lifting at a faster rate than costs - are on builders' sides.


Some of the firms with healthily climbing share prices do not even lean on Help-to-Buy for many of their sales, yet this is not the case at Taylor Wimpey where 42 per cent of private first-half sales were made with the scheme's assistance.


Lucky, then, that "Help-to-Buy One" (the part that applies to new-builds and is less politically-toxic than the side that applies to all homes) has been extended until 2020.


There are other risks, such as the supply of new land to build on being squeezed. But with people finally waking up to the chronic need for more homes, and with prices staying elevated, there is scope for housebuilders to continue their bull run.


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: City A.M. (UK)


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