Bloomberg News

U.K. Homebuilders Rise on Government Buyer Aid: London Mover

March 13, 2012

Barratt, the country’s largest homebuilder by volume, rose as much as 5.4 percent, while Taylor Wimpey, the U.K. No. 2, gained as much as 4.4 percent. Photographer: Paul Thomas/Bloomberg

Barratt, the country’s largest homebuilder by volume, rose as much as 5.4 percent, while Taylor Wimpey, the U.K. No. 2, gained as much as 4.4 percent. Photographer: Paul Thomas/Bloomberg

Barratt Developments Plc (BDEV) and Taylor Wimpey (TW/) Plc led gains by U.K. homebuilders after the government said it will help buyers with small cash deposits buy new homes.

Barratt, the country’s largest homebuilder by volume, rose 5.3 percent, while Taylor Wimpey, the U.K. No. 2, gained 4.3 percent. Persimmon Plc, the largest U.K. homebuilder by market value, advanced 1.5 percent.

U.K. Prime Minister David Cameron said yesterday that the government will underwrite part of the loans to buyers of new properties in order to spur housing construction. Customers with small cash deposits will be able to get financing for as much as 95 percent of a home’s value, as long as the price is 500,000 pounds ($780,000) or less.

Cameron’s office estimated the program will help as many as 100,000 buyers and support an estimated 50,000 jobs. “It’s no good hoping people will climb the property ladder if the bottom rung is missing,” the prime minister said. “Affordable properties and available mortgages are vital.”

Credit Suisse raised earnings forecasts for U.K. homebuilders by 6 percent for 2012 and 14 percent for 2013, and maintained “outperform” recommendations on York, England-based Persimmon (PSN), Taylor Wimpey and Bellway Plc. (BWY) That means analysts expect the stock’s return to exceed the average among peers.

“Only a small fraction” of the 100,000 sales estimated by Cameron’s office are necessary to boost homebuilder earnings, Harry Goad and Arnaud Lehmann, analysts at Credit Suisse, said in a note today.

Rosy Forecast

The prime minister’s forecast is unrealistic because banks and the housing industry won’t have the “willingness and logistical ability to participate on such a material scale,” the analysts said.

Credit Suisse raised share-price predictions for publicly traded U.K. homebuilders, saying Persimmon may rise 17 percent from yesterday’s close of 670 pence. Deutsche Bank also raised most price targets for the companies.

“Strong news flow at both corporate and industry levels will kick-start a further bout of earnings upgrades, once again driving share price momentum,” Deutsche Bank’s Glynis Johnson said.

Lenders including Barclays Plc (BARC), Nationwide Building Society and Royal Bank of Scotland Group Plc (RBS)’s NatWest Home Loans Ltd. will offer mortgages under the government proposals, the Council of Mortgage Lenders said in a statement.

Barratt Registrations

About 20,000 people in England have registered with Barratt to buy their homes using state-backed mortgages, the company said in a statement.

A house-price index rose to a 19-month high in February as first-time buyers moved to beat the expiration of a property-tax exemption, the Royal Institution of Chartered Surveyors said today.

The figures partly reflect buyers rushing to take advantage of a stamp-duty exemption for first-time buyers purchasing a home for less than 250,000 pounds, before the provision ends March 24. While that’s boosting sales, an improving economic outlook is bolstering longer-term price expectations, RICS said.

“A renewed sense of optimism may be slowly returning to the property market,” the surveyors group said. London “continues to stand out as being particularly buoyant.”

To contact the reporters on this story: David Risser in London at drisser@bloomberg.net; Chris Spillane in London at cspillane3@bloomberg.net

To contact the editors responsible for this story: Mark Gilbert at magilbert@bloomberg.net


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