UK property builder buoyant for investors

UK based house builder Bovis Homes expects to deliver further improvements to investors after strong trading in 2011 enabled it to post a 19% increase in private home reservations.

Bovis said revenue during the first half of 2011 was up 16% to £134 million pounds, with operating profit at £10 million with an operating margin of 7.5%, from £4.8 million pounds in the first half of 2010 and an operating margin of 4.2%.

The group's pretax profit rose to £8.1 million pounds, from £3.5 million in the same period last year.
‘The group has delivered a strong performance during the first half of 2011 with profit before tax more than doubling, against the backdrop of stable, but challenging, market conditions,’ said chief executive David Ritchie.

‘With the progressive, sustainable improvement in the group's profits and the board's confidence in the group's growth strategy, an interim dividend of 1.5 pence has been declared,’ he added.

The group said it was confident that, assuming current market conditions continued, it could increase its output capacity in order to grow volumes and profit margins, whilst controlling capital employed and thus delivering further material improvements in returns to shareholders.

The news comes at the UK’s Housing Minister Grant Shapps pledged that house building is getting a boost with plans to build 170,000 new homes in the next four years.

He was reacting to a report from the National Housing Federation that said that home ownership in England will fall to 63.8% in 2021, its lowest level since the middle of the 1980s because not enough new houses are being built.

‘That's why I've announced plans to release thousands of acres of public land for house building. And despite the need to tackle the deficit we inherited, this government is putting £4.5 billion towards an affordable homes programme which is set to exceed our original expectations and deliver up to 170,000 new homes over the next four years,’ said Shapps.

But the NHF said that many will be unable to get on the property ladder because rising rents make it even harder to save for the large deposits banks now demand.

‘With home ownership in decline, rents rising rapidly and social housing waiting lists at a record high, it’s time to face up to the fact that we have a totally dysfunctional housing market. Home ownership is increasingly becoming the preserve of the wealthy and, in parts of the country like London, the very wealthy,’ said David Orr, chief executive of the federation.

In England, 67.8% of people currently own their home. London will see the biggest drop over the next ten years, from about 50% to 44% in 2021, while the North East will be the only region to see an increase, rising from 66.2% to 67.4%, according to the NHF report.

Today, the typical first time buyer has to save £26,346 to get a mortgage, the equivalent of 20% of the value of their home, according to the Council of Mortgage Lenders. Four years ago, they needed only a deposit of 10%.

The NHF blames builders rather than banks. ‘Despite the overwhelming need to increase supply, house building has slumped to a 90 year low, plunging the country even deeper into the mire,’ he said.