Housebuilders back in profit as optimism returns

Housebuilders back in profit as optimism returns Having clung on through the worst housing slump in decades, Britain's housebuilders are back in the black and their shares are again sought-after in the City. The UK housing shortage is apparently getting worse as opposed to better. By 2015 demand for housing will outstrip supply by more than 500,000 homes, according to the Federation of Master Builders (FMB), partly due to delays in the planning system. Housebuilders have also improved returns by snapping up land without planning permission cheaply and paying for it only after getting the green light for development. In some cases, they even buy farmland at agricultural prices and let it back out. " He claims Britain's housing shortage may not be as bad as it is purported to be, arguing that the housing stock has gone up by almost twice the rate of population growth since 1991. Steve Morgan, the outspoken chairman and founder of Redrow who also owns Premier League football club Wolverhampton Wanderers, dismisses this as a "load of bollocks" and others in the City cast doubt on Stewart's calculations, saying they do not appear to account for immigration, the trend towards one- and two-bedroom households, and removal of old houses. And Investec's Bessell does not expect any material shocks to house prices over the next couple of years. He says the housing market has already reached "something of a nadir, with a very low level of activity which represents little, if anything, more than the transactions of the 'must movers' in the market". The heady boom days of 2007 are clearly over, but all of the listed housebuilders are profitable again. Analysts at Investec give the thumbs-up to the sector, which they say is "huffing and puffing" on the road to recovery. So is everything tickety-boo again? Brokerage Collins Stewart thinks not. Housing analyst Alastair Stewart, one of the City's most bearish voices, has warned that UK housing could be stuck in a "lost decade", with mortgage lending, transactions and prices all likely to fall this year. "Housing could remain caught between weak consumer appetite for borrowing and banks' aversion to mortgage lending largely due to eurozone risks. The firm's Mike Bessell says: "What has really changed from 2008/2009 and even early 2010 is that housebuilders are in control of their destiny. " Housebuilders have great reasons to be fairly optimistic. The industry is anxiously awaiting the government's new national planning policy framework, due in weeks. The Home Builders Federation is calling on the government to resist the "vocal anti-development lobby's scaremongering". Persimmon , which owns the Westbury and Charles Church brands, went further and pledged to return £1. 9bn, or £6. Even so, this year could be good for first-timers, if the government-underwritten NewBuy scheme is successful. From this month, it will allow people to get a mortgage with only a £10,000 deposit for a newly built property priced up to £500,000. "The housing market is remarkably stable but at low levels of activity," he said. The extent of the general downturn in construction is illustrated by official figures showing new orders slumped to their lowest level since 1980 last year. The only sector in which orders rose was private housing, up 6%. The housing boom saw housebuilders ramp up construction just as the financial crisis struck in 2008. Much chastened, they now seem happy building far fewer homes, with a shift away from apartments towards larger family houses. First-time buyers are still struggling to get on the housing ladder and the impact of this has been fewer homes being built, despite the pent-up demand, it argues. David Ritchie, chief executive of Bovis Homes, echoed the general feeling in the sector when he talked of static sales levels, flat prices and stagnant mortgage approvals being the "new norm" last week. Just 115,000 permissions to construct homes were granted in 2011, half the 2006 level and half the number required, according to building data firm Glenigan. Changes to the planning system will be crucial to how swiftly homes can be built in future. Housebuilders are certainly rubbing their hands. Pete Redfern, chief executive of Taylor Wimpey, believes it might have a "material impact". 20 a share, to shareholders in the coming nine and a half years, sending its stock soaring. Housebuilders back in profit as optimism returns Trade News selected by Local Linkup on 05/03/2012