Tuesday, 15 October 2013

A tale of two ditties

It’s not so much a tale of two cities as a tale of one city and the rest of the UK. Stock Exchange releases today from two very different housebuilders continue to show strong trading in both cases, but in very different ways.

Bellway, a volume housebuilder somewhat erroneously associated with the North recorded an 8% increase in volumes, a 3% rise in prices and a whopping 34% in pre-tax profits for the year to July. This reflected a broad-based recovery across most of the company’s regions, and was heavily assisted by the new homes- only first phase of the government’s Help to Buy.

AIM-listed Telford Homes, which overwhelmingly trades in and around London, said in a trading update for its first half year to September that full year results, to March, would be “significantly ahead of market expectations”. This was thanks largely to “substantially improved margins” and without recourse to any Help to Buy funding.

Newcastle-HQ’s Bellway said it would target 15% more housing completions in the current financial year. Telford offered a bolder, but less specific, strategy “to considerably increase output over the next few years”.

Where the two companies diverge considerably appears to be in who buys its homes. Bellway concentrates on traditional family housing, largely for “real” buyers and saw prices rise by 8% in the northern half of its operations largely as a result of selling bigger units rather than underlying price inflation. (Its southern operations saw more modest growth in volumes and prices, probably because of more demanding year-on-year comparables.)

More apartment-heavy Telford’s statement would have greatly heartened London Mayor Boris Johnson on his mission to woo Chinese investment in the capital. Two-thirds of reservations for one of its latest launches, near Canary Wharf, had come from foreign investors and, for the first time, many of these were from Chinese. (The lowering of trade and visa barriers, in the wake of Boris’s – and, oh yes, George Osborne’s – trip to Beijing, one assumes, will only further encourage this trend.)

Significantly, these sales are for completion around spring of 2017. Indeed, across its sites, Telford is seeing “exceptional demand from both owner-occupiers and UK investors even though the developments are being marketed a year or more ahead of completion”. “Off-plan” is back with a vengeance.

What emerges from these two accounts is a picture in London of speculative froth much dependent on the whims of global speculators and, everywhere else, a plodding recovery that is largely reliant on government support, low interest rates and banks’ recently improved risk appetite.
Bellway link Telford link

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