Cala sales growth latest sign of housing recovery

Alan Brown says the 'handbrakes are off' for Cala as it looks to step up building programme. Picture: Contributed
Alan Brown says the 'handbrakes are off' for Cala as it looks to step up building programme. Picture: Contributed
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Cala, the Scottish housebuilder, unveiled expansion plans yesterday that are expected to give a pointer to an upturn in the housing market.

A rise in completions and record profits from the Edinburgh-based builder will offer encouragement that other housebuilders reporting this week will reveal a similarly positive trend.

In its first update since a £210 million takeover by Legal & General and Patron Capital Partners in March, Cala said private completions in its financial year just ended were up 4 per cent, with the improvement gathering pace in the second half.

Since 1 January, the upmarket builder booked 10 per cent more sales than in the same period in 2012.

Chief executive Alan Brown said the company was benefiting from a knock-on effect working its way up the market, and builders with more exposure to the first-time buyer market likely saw a 25 per cent upturn in reservations through the first half of 2013.

He said the market south of the Border was already feeling the benefit of the Chancellor’s beefed-up Help to Buy scheme, as well as the joint Bank of England and Treasury Funding for Lending scheme, which was freeing up the mortgage market.

“Secondly, there just seems to be a bit more stability in the economy as a whole,” he added. “It just gives that bit more confidence as to where the market is going.”

Cala has the highest selling prices of any of the top 20 builders operating UK-wide, and its customers typically have significant equity in the housing market already.

Brown said that had enabled the firm to weather the financial crisis more easily, and its new private equity ownership and lower debt level meant it was poised to double the amount of homes it builds in the next four years.

“With our new investment partners giving us a huge amount of support, the handbrakes are off for Cala.

“We are nor financially constrained in any way and we are able to look at numerous growth areas for the business, particularly in the south of England, and the more affluent areas of Edinburgh and Aberdeen,” he said. “Our plan is to at least double the number of houses we build over the next four years.”

With 851 completions in the year to 30 June, Cala is already back to its peak levels of 2007. With sales now coming from sites bought at depressed prices during the recession, gross margins were up to a healthy 19 per cent and the company expects to post record profits when it files full results for the year in September.

Cala’s trading update was published in a style usually associated with listed companies – a pointer that its new private equity owners will want to exit through a flotation in due course.

Hints that the housing market is finally improving meant builders have been among the best performers on the London Stock Exchange this year, helping Persimmon regain its place in the FTSE 100 last month after a five-year absence.

The York-based group was expected to unveil a significant pick-up in reservations in its update today, while Taylor Wimpey’s statement due on Thursday is also eagerly anticipated by investors.

Bank of England figures provided a further sign of the housing market pick-up yesterday, showing mortgage approvals soared to their highest level in three-and-a-half years in May.