Thursday, 27 February 2014

Still time to climb on the housebuilders’ ladder

Surely UK house builders have done so well already, that they can’t possibly have much further to go? When the heated state of the UK housing market becomes headline news on a regular basis, then as a stock investor, you have to be worried, right?

While that might normally make sense, in this case I would beg to differ. It is true that, since I wrote my last article extolling the virtues of UK house builders on February 4 (UK Building is All Systems Go!), the Bloomberg UK house builders’ index has risen some 9%, its pullback today notwithstanding.

But let me present a series of data that I find to be compelling evidence that the current bull market in housing-related stocks  still has some way to run…

Item 1: House Builders have 37% to go to Reach their 2007 Highs

Yes it is true! As a group, house builders like Barratt Developments (BDEV), Berkeley Group (BKG) and Persimmon (PSN) have 37% further to rise before they hit their June 2007 share price highs.

Item 2: Housing Starts Are Picking Up, But Still Below Average 

House builders are breaking ground on more new projects today than at any time since the first quarter of 2008. However they are still a long way from climbing back to the average for quarterly housing starts seen pre-Financial Crisis. 

Item 3: and Building Completions Are Even Worse…

If we look at the rate of building completions in the UK, the situation looks even worse...

Item 4: Mortgage Approvals Go Up, Mortgage Rates Down

And all the while, the UK Government is of course doing its bit to help the purchasing of new-build homes with their Help to Buy schemes, effectively guaranteeing the first 20% of a 95% loan-to-value mortgage, allowing first-time buyers to get on the property ladder with only a 5% deposit. No wonder then that the number of mortgage approvals is going up!

To read on, see the charts and see my favoured stocks for this theme,
click on this web link:

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