Builders hold out hope of recovery in house sales

DEMAND for new-build homes is holding steady amid help from various government schemes, according to three of Britain’s largest housebuilders.

Redrow and Taylor Wimpey said access to mortgage finance was still restricted, but initiatives such as NewBuy – which underwrites 95 per cent mortgages with participating lenders in England – was helping.

Bovis Homes added that average prices have risen to around £190,000, up from £180,100 last year, with prices generally stronger in the south of England.

Along with rivals such as Barratt and Persimmon, the group has benefited from buying cheap land in the wake of the financial crisis and expects its full-year operating margin will improve to about 13 per cent, up from 10 per cent last year.

Bovis said it had continued to invest in “good-quality” land with planning consent and this year had acquired 2,331 plots across 16 sites, with a further 750 plots expected to be added in the near future. The firm’s net debt stood at £65 million as of 9 November.

Redrow founder and chairman Steve Morgan said industry activity would have been “significantly lower” without the help of NewBuy and FirstBuy, which is aimed at helping first-time buyers south of the Border get access to loans.

In an update covering the first 19 weeks of its financial year, the builder said it continued to make “steady progress”, with the average price of reservations 22 per cent ahead of last year at £243,000, reflecting the strength of the London property market.

Redrow said its ongoing investment in land had seen its net debt increase from £14m in June to £90m, but its balance sheet remained strong, leaving it “well placed to pursue the right opportunities as they arise”.

Taylor Wimpey reported 467 reservations under NewBuy and its Scottish equivalent since the scheme’s launch in March. The group also said it expects to end the year with net debt of around £117m, in line with last year.

Chief executive Pete Redfern said he hoped to see further improvements in mortgage availability over the coming months through the £80 billion Funding for Lending scheme, launched by the Bank of England and Treasury in August. He added: “While we continue to take a cautious approach, given the uncertainty in the wider economy, conditions within the UK housing market remain stable.”

Shore Capital analyst Jon Bell said the trading updates were all broadly in line with the broker’s expectations, but Robin Hardy at Peel Hunt said the market had become used to more bullish updates from the sector this year.

Hardy said: “There has been something of a sell-off in the last few days – Taylor Wimpey has fallen close to 10 per cent since the recent high on 2 November – and we would expect this to continue.”