Evidence that Help to Buy is helping house builders more than buyers

The larger listed house builders have reported accelerated demand for their new David Wilson Homes Sold Boardhomes, with sales, reservations and profit considerably higher so far this year. First half forward reservations are up an average 36% on the same period last year with average revenues and profits are up 13% and 40% respectively. 

Bovis Sales OfficeHelp to Buy has without doubt significantly contributed to the increase in reservations since it was introduced in April, with around 12,500 homes reserved as a result of the scheme, accounting for around a quarter of each house builder’s sales so far this year. 

Barratt CEO Mark Clare said recently: “We have had people coming at 4am for a 9am start and have many examples where our sales teams have arrived to find a dozen or so people waiting. We are starting to see queues, which is not something we have seen for years. And we are also seeing people buying off plan, which we have not seen for five or six years.”  

House builder   Reservations    Revenue   Profit    Homes built      House price rise

Barratt                        53%                12%         74%     6%  13,663        6% to £213,000

Bellway                       27%                12%          25%    8%   5,652         3% to £193,000

Bovis                           43%                17%           19%    2%      963        15% to £188,500

Taylor Wimpey         35%                12%          42%    2%    5,191        7% to £188,000

Persimmon               21%                 12%          40%    7%   5,022        7%  to £179,199 

HBF 4 StarJust one house builder reported their customer satisfaction  levels. Taylor Wimpey reported a fall of over 5% to 88% (93.2% 2012 full year) which would mean that Taylor Wimpey loses their 5 star status if satisfaction scores do not improve in the second half. 

Reported average selling prices have increased 7% to 8% which may be reflected in the fact that builders are now building larger, more profitable homes they can now sell with the taxpayer picking up 20% of the purchase prices rather than lower-priced apartments. The house builders claim that house price inflation was around 1% to 2%, which is at odds with the percentage increase in their average selling prices. 

There has been a modest 5% average increase in the number of new homes house builders are building. However Barratt confirmed they had increased production by 20% during the last two years and announced plans to build 45,000 new homes across the next three years. 

Profits are up, margins are up and housing supply relatively static. This all suggests that house prices are starting to look like a bubble market looking for a pin.  cropped-help-to-buy.jpg

Leading house builders met with the housing minister Mark Prisk last week to inform him that the taxpayer-funded ‘Help to Buy’ scheme has to date, been an “unqualified success”. Despite this, they used last week’s meeting as an opportunity to push for even further help. Persimmon, Barratt and Taylor Wimpey chiefs discussed what could be done to relax their perceived constraints on housing supply, those old chestnuts – the planning system and regulatory costs.

The government should give serious consideration to a ‘Windfall Tax’ levied on the excessive profits the house builders are making on the back of “Help to Buy” before conceding any further relaxation of rules and additional measures to the industry.

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