Housebuilders: a sector on shaky foundations
Aug 28, 2009
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Is this the long-awaited upturn for housing? Persimmon this week signalled confidence in the market by becoming the first major housebuilder to ascribe a higher value to its huge land bank.
Following last year's £680m plot write-down, it has returned to the black in 2009's first half with a £9.8m pre-tax profit after a £28m 'write-up', while net debt will be cut faster than originally estimated. Bovis reports holding net cash (£8m) for the first time in two years.
What the commentators said
Builders are "getting first-home buyers [who are having trouble getting credit] over the threshold with the help of Homebuy Direct", under which the builder and the government together lend 30% of the deposit, says The Times's Carl Mortished. But funding for the scheme is under pressure. "When funds run out, it will be back to square one for first-time buyers."
Lower interest rates have been another temporary crutch for the sector, but they "can only go up from here", said John Messenger of RBS. "It's hard to see what will get the [housing] market moving." House prices are likely to fall further, Capital Economics pointed out.
With the economic backdrop weak amid rising unemployment and lending still so tight, the recent uptick in prices won't last. Indeed, the latest fall in auction property prices is a "warning" that it could be "about to fade".
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