UK housebuilders are confident they can continue reaping rewards from a red-hot property market even as a key tax break is removed and construction costs rise.
Demand for new homes was stronger than expected in the first half of the year, housebuilders Redrow and Vistry Group said in trading updates on Wednesday, with both selling homes quicker than in the previous two years.
The sales boom was triggered by the lifting of coronavirus restrictions on the housing market in May 2020 and the introduction of a stamp duty holiday in July. It has been sustained by movers looking for larger space or relocating as a result of the pandemic.
Both builders have bolstered their cash positions on the back of the boom. Redrow held £160m in net cash at the end of June, compared with net debt of £126m a year earlier; Vistry swung from net debt of £357m to net cash of £32m over the same period.
According to Redrow, the rush to purchase homes was accelerated in recent months as buyers looked to beat the winding down of the stamp duty holiday — which tapered last week to reduce the possible savings on offer from £15,000 to £2,500.
With that stimulus reduced, there are indications that the runaway pace of house sales and price growth seen over the past year might slow or even reverse.
A house price index published by Halifax on Wednesday shows house prices dipping slightly last month, the first monthly fall since January.
But the housebuilders shrugged those concerns off. Both Redrow and Vistry are selling homes at rates 10 per cent higher than 2019, despite the bulk of buyers today gaining no stamp duty benefit.
The high sales rate is more striking given that builders have also had to contend with a narrowing of the government’s Help to Buy scheme, which has underpinned new homes sales since its introduction in 2013.
The equity loan scheme was used by 50 per cent of Redrow’s buyers last year but, after price caps were introduced in April, just 13 per cent this year.
Rising prices for materials and pressure on supply chains are also concerns. But, according to Vistry boss Greg Fitzgerald, “house price inflation is more than offsetting any cost pressure”.
Glynis Johnson, an analyst at Jefferies, said the updates were “reassuring”. Housebuilders’ “stock prices already factored in any clouds on the horizon, whether the [end of] the stamp duty holiday or cost inflation”, she said.
Separately on Wednesday, Countryside Properties announced a new strategy which reduces its reliance on selling homes to private buyers.
The developer will wind down its business selling properties in the home counties and instead focus solely on its “partnerships” division, through which it partners with housing associations and operators in the private rental sector — an area attracting increasing institutional investment.
“Investing into sites wholly for the private market, you need to be very sure the private market is there to absorb the product. Mixed tenure means we can invest much quicker with much more certainty because you have the partners,” said Iain McPherson, Countryside’s chief executive.
Shares in Redrow rose 4.5 per cent to 658p in morning trading. Shares in Countryside rose 2 per cent to 506p and Vistry shares were flat.