Bellway has reported a 50% increase in pre tax profit for the year ending July 31 2011, returning £67.2 million on turnover up 15% to £886.1 million.
The firm sold 4,922 homes up from 4,595 and achieved an average selling price of £175,613 (£163,175).
Chairman Howard Dawe said: “The Group’s average weekly reservation rate rose during the early part of 2011 and did not fall until the summer months – a typical pattern for a normal housing market. Reservations in the first nine weeks of the new financial year are almost 11% ahead of the same period last year.”
Analysis: Most housebuilders are publishing positive results with increases in turnover and profit now that their businesses have been slashed in size and the remaining offices are operating at full capacity. By way of example, the new turnover figure for Bellway is only half the figure posted for 2007. Nevertheless, solid improvements in financial performance will sure up confidence and encourage expansion plans.
Gentoo Group has been granted approval for a new home purchase plan which will allow first time buyers and people renting long-term to buy a home without needing a deposit or mortgage.
The plan, named Genie – approved by the Financial Services Authority (FSA) – lets buyers acquire an increasing share in their property over a 25-year period. The purchaser will have the same rights as a traditional home owner and will pay a monthly residency fee, adjusted every five years, Gentoo explained.
Buyers can opt out of Genie at any stage and sell their accumulated shares back to Gentoo. Alternatively, they can put the property on the open market.
Following a successful pilot in May 2010, Genie will initially be rolled out across North East England, but Gentoo plans to take the home plan nationwide.
“Genie has been in development for two years and we genuinely believe that our home plan addresses one of the major housing issues of our generation,” said Peter Walls, Gentoo Group’s chief executive.
Analysis: This is a variation on the split equity model widely available through housebuilders and Housing Associations nationwide with monthly payments buying a share in equity and also paying rent. It offers greater flexibility in allowing the purchaser the opportunity to increase their payments to buy a 100% stake which they can sell on the open market and has the advantage over traditional mortgage products that it requires only a small set up fee rather than a substantial deposit. It will be interesting to see how comfortable the house purchasing community will be with a new and relatively complex way of buying property and if Gentoo are successful in raising the finance to roll this out on a substantial scale.
House purchase lending enjoyed a rise in August, according to figures from the Council of Mortgage Lenders released today (October 11).
In August, there were 52,000 loans advanced at a value of £7.9 billion, up from 48,700 (worth £7.2 billion) in July. In August 2010 51,000 house purchase loans were advanced at the value of £7.7 billion.
CML said that lending to both first time buyers and home movers (the two groups make up the home loan total) was at its highest for more than a year. Loans to first time buyers rose 5% both from July 2011 and August 2010. The value increased 4% on July 2011 and 9% on August 2010. Loans to home movers rose 8% (10% by value) on July 2011 and 1% (2% by value) from August 2010.
Director general of the CML Paul Smee said: “Even though it is impossible to ignore the knocks to confidence emanating from the Eurozone, August lending showed welcome signs of life.
Analysis: A positive story which is not easy to attribute to anything happening in the real economy. However, anecdotally, Sales Directors are saying it is getting slightly easier to get mortgage approvals for customers with lenders showing a hint of flexibility. Also, financial advisors are reporting a steady increase in the number of mortgage products on the market which will be creating some competition amongst lenders to secure business.
House prices dipped 0.5% in September, Halifax’s latest data has shown.
The average price of a UK home is now £161,132. Prices in Q3 were 0.1% higher than in Q2, the first quarterly rise since Q1 2010. Prices in the three months to September were 2.3% lower against the same period last year.
Housing economist Martin Ellis said that house prices had been a “mixed monthly picture” throughout 2011 and reflected a market where prices were “lacking genuine direction”.
Ellis commented: “Greater uncertainty about economic and personal financial circumstances, together with pressure on householders’ finances from weak earnings growth, higher inflation and increases in taxes, are likely to be constraining housing demand.”
However, he added that low interest rates and rising employment over the past year had been supporting the market. “We expect little change over the remainder of this year.”
Analysis: In short we have the basic economic conditions of low demand (with mortgage finance restrictions, inflation and economic uncertainty being the key factors) and low supply (housebuilders producing half the volumes of 2007 and second hand sellers reluctant to come to market) leading to a steady price. However, the longer prices remain stable the greater confidence the mortgage lenders will have in offering higher Loan to Value products and therefore give first time buyers greater access to the property market.
Edbury Daley Viewpoint: The culmination of all the current housebuilding news is a stable recruitment market operating at relatively low levels. Sales positions dominate the recruitment instructions from negotiator through to regional department heads as housebuilders need the very best sales people in the prevailing market conditions. Greater mortgage finance would be the key to rapid housebuilder expansion and a potential glut of job vacancies across the disciplines.
Simon Edbury is a specialist in the UK housebuilding job market.