Builders gain from efforts to boost available loans

By GARETH MACKIE
Published on 26/02/2013 00:00

TWO of the UK’s largest housebuilders have reported strong growth in full-year profits as the industry benefits from government schemes to help people get on the housing ladder.

Persimmon, the country’s biggest builder by market value, said underlying pre-tax profits in the year to December jumped 52 per cent to £225.1 million, on revenues 12 per cent higher at £1.7 billion.

Rival Bovis Homes posted a pre-tax profit of £54.1m for 2012, a jump of 69 per cent compared with the previous year, as revenues grew 17 per cent to £425.5m.

The industry has benefited from builders’ strategy of snapping up cheap development land at the depths of the financial crisis, while sales have also been boosted by initiatives such as the £80bn Funding for Lending scheme (FLS) and New Buy, which seek to free up mortgage finance and make it easier for people without a large deposit to buy new homes.

Mortgage approvals across the UK were down 14 per cent in January compared with the same month last year, according to figures published yesterday by the British Bankers’ Association (BBA), although the lenders’ trade body said there were signs that more first-time buyers were hoping to enter the market.

Chris Williamson, chief economist at research firm Markit, said: “The BBA linked the weakness to the weather, and adverse cold and snowy conditions may well have deterred housing market activity and therefore mortgage borrowing during the latter half of the month.”

Persimmon chairman Nicholas Wrigley said the market was being constrained by a lack of mortgage availability, but there were signs that lenders are embracing the FLS “and we have seen some recent reductions in mortgage rates”.

His comments were echoed by Bovis Homes chief executive David Ritchie, who said the FLS should also enable banks to offer higher loan-to-value mortgages, taking some of the burden off those who are struggling to save towards a deposit.

Ritchie added: “The positive effect of the FLS has not yet been evidenced in published mortgage approval statistics, but there is a growing consensus that such a positive effect will be seen in mortgage approval data over the coming months.”

Persimmon said the number of completions grew by 6 per cent to 9,903, with the average selling price rising by the same margin to £175,640. Shareholders are due to receive 75p per share on 28 June under the firm’s long-term capital return plan.

Meanwhile, completions at Bovis rose 15 per cent to 2,355 homes and its average selling price grew 5 per cent to £170,700. Its board proposed a final dividend of 6p per share, to be paid on 24 May. That will give a total payout for the year of 9p per share, up 80 per cent on 2011.