Vistry Group, formerly Bovis Homes (LON:BVS), issued a positive trading update for the year’s end. The full-year figures will be published next month. The number of house completions increased by 2.89% to 3,867. Recently the group competed the acquisition of Liden Homes for more than £1 billion, and today Vistry said that costs related to the takeover will be more than £15 million. Vistry have set the tone for the next month’s annual figures as pre-exceptional profit before tax is expected to be slightly ahead of market consensus, in addition to a further improvement in operating margin. Vistry confirmed that forward sales for 2020 are ‘strong’. It was a short and sweet update from the home builders. There has been a lot of downbeat stories about the health of the UK property market in recent months, but the company that used to be called Bovis Homes, continues to be in good shape.
Persimmon (LON:PSN) also revealed a full-year trading update this morning. The FTSE 100 stock will reveal its full-year numbers in late February. Annual legal completions slipped by 3.6%, while the new housing revenue dipped by 3.5%. Persimmon said that annual pre-tax profits will be in line ‘our market consensuses’, and that it is in a ‘strong position’ for 2020. The update should install a reasonable amount of confidence in the stock as business appears to be ticking along.
In 2019 some of the steam was let out of the UK housing market, as some regions of the country saw the growth rate of house prices cool, while certain pockets of the country witnessed prices fall. Political uncertainty was a factor as the UK was supposed to have left the EU twice, but an extension was requested and granted on both occasions. This encouraged some potential buyers to hold-off on making their potential purchases. The tapering off of house prices didn’t hold back the share price performance of major house builders. The Bovis Homes (LON:BVS) share price rallied by more than 60%, while the Persimmon (LON:PSN) share price rallied roughly 38%.
This week there has been increased chatter about the Bank of England (BoE) potentially cutting interest rates. Gertjan Vlieghe was the latest policy maker to suggest he would vote to lower interest rates. Keep in mind that Jonathan Haskell and Michael Saunders have voted to lower rates recently. Some traders believe the UK central bank will keep their policy on hold until the Brexit situation has become clearer. A looser monetary policy from the BoE should give support to the UK housing market, and in turn give assistance to the house builders.
UK politics was given some clarity in light of the major victory by the pro-business Conservative party last month. There is chatter of an increase in government spending to try and boost the economy, and that has been a factor in the broadly positive start the home builders have gotten off to in 2020.
DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.
No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.