Building companies. What's going on?

Tuesday, Aug 02 2016 by
13

Can anyone explain the behaviour of prices in well-established, good dividend paying building stocks at exactly the same time as the media are reporting a housing crisis in which more houses must be built and regular predictions that the BoE will soon lower interest rates, making borrowing even cheaper than it is now? Does somebody think an army of Polish construction workers is about to leave the UK? I had come to think that with the government wavering about Hinckley Point and about HS2 that the only seriously popular way to progress to satisfy the groundswell of anger evident by the Brexit vote was to print money and push it into the house building sector. That way, you achieve quantitative easing without exporting the money, create employment and solve the socially dangerous phenomenon of over-crowding.


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Barratt Developments PLC is a holding company. The Company is principally engaged in acquiring and developing land, planning, designing and constructing residential property developments and selling the homes, which it builds throughout Britain. The Company operates in two segments: Housebuilding and Commercial developments. Its housebuilding segment operates through approximately six regions and approximately 30 operating divisions delivering over 17,319 homes. Its Commercial developments are delivered by Wilson Bowden developments. It purchases land in targeted locations and designs homes for its customers using standard house designs. Its brands include Barratt Homes, David Wilson Homes and Barratt London. Its Barratt Homes brand focuses on making homes. Its Barratt London brand portfolio offers apartments and penthouses in Westminster to riverside communities in Fulham. Its David Wilson Homes brand offers home design and specification, and focuses on developing family homes. more »

LSE Price
491.9p
Change
-2.2%
Mkt Cap (£m)
5,101
P/E (fwd)
7.3
Yield (fwd)
8.9

Bovis Homes Group PLC is a United Kingdom-based company, which is engaged in designing, building and sale of houses for both private customers and Registered Social Landlords. The Company offers a portfolio of properties, including one bedroom apartments, two bedroom apartments, five bedroom apartments and six bedroom detached family homes. The Company carries out and manages a range of housing development activities, including purchasing of the land, building of the houses and the after-care service for its customers. The Company focuses on various activities, which include land acquisition, planning, legal, design, surveying, engineering, purchasing, construction, sales and marketing, public relations and customer service. The Company works in partnership with house builders, local authorities, housing associations and other agencies. more »

LSE Price
937.6p
Change
-0.8%
Mkt Cap (£m)
1,274
P/E (fwd)
8.8
Yield (fwd)
10.7

Persimmon Plc is a United Kingdom-based holding company. The Company is engaged in house building within the United Kingdom. The Company trades under the brand names of Persimmon Homes, Charles Church, Westbury Partnerships and Space4. The Company offers a range of homes from studio apartments to family homes in approximately 400 locations under Persimmon Homes brand. The Company builds homes under Charles Church brand in a range of locations. The Company focuses on affordable social housing and sells these homes under Westbury Partnerships. The Space4 business operates an off-site manufacturing plant producing timber frames, insulated wall panels and roof cassettes as a fabric first solution to the construction of new homes. more »

LSE Price
2106p
Change
-1.0%
Mkt Cap (£m)
6,723
P/E (fwd)
7.7
Yield (fwd)
11.0



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38 Posts on this Thread show/hide all

herbie47 4th Aug '16 19 of 38

In reply to post #145584

Well they are included in the figures, if you take them out thats about 200,000 people.

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herbie47 4th Aug '16 20 of 38
2

In reply to post #145566

What do you mean by 3rd world?

So its nothing to do with the EU then?

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Blissgull 4th Aug '16 21 of 38

Agreed Herbie, but if you also take aout the students who leave after finishing their studies that removes a similar number and the net migration figure is little changed.

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Blissgull 4th Aug '16 22 of 38
4

Sorry herbie I missed your earlier question.

"So its nothing to do with the EU then?"

The EU is a contributing factor. Immigration from the EU has been far too high and Germany's (or rather Merkel's) insane policy concerning so called refugees threatens to make the situation worse.

However the EU is not the major source of the immigrants swarming into the UK.

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herbie47 4th Aug '16 23 of 38

In reply to post #145602

Not sure about that, if you exclude students then more immigrants are from EU. The non-EU immigrants are controlled, so most are coming because they have job or they have family here. It's not just any job now, hence many of the care work etc. they can't apply for. According to my rough figures there are only about 100,000 non EU immigrants if you exclude students, even then these will not all be 3rd world, as it will include Americans, Aussies etc. Here are some figures: https://fullfact.org/immigration/eu-migration-and-uk/

Take students out and about 70% of students are non EU, then the EU is the major source.

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Blissgull 4th Aug '16 24 of 38
4

Herbie, your logic is flawed. The figures on that page are net migration figures, i.e. the those coming in minus those leaving.

If you are going to exclude students arriving from the figures then you should also exclude students leaving when they have finished their studies.

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herbie47 4th Aug '16 25 of 38
2

In reply to post #145608

Thats a good point but you can see that non EU net immigration has fallen and EU net immigration has soared in the last 5 years.

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hayashi22 5th Aug '16 26 of 38
6

Quite incredible that Labour policy was to have no immigration restrictions. Never put to the electorate but that's how it was. If you come from Somalia with no money you go straight into free housing and of course free health and education-you may as well have 10 children. The system was designed for people to pay in over a lifetime of working and then take out at the end of their working life. It was never designed to support hundreds of thousands or millions of 'poor people' from other parts of the world. Got to assume that Blair saw all these people as natural Labour voters......One of the greatest myths is that a country needs to have a constantly expanding population to be successful.

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ls2g08 5th Aug '16 27 of 38
1

Hayashi22 - that is not a myth. Look at countries with falling populations, a prime example is Japan, which has had low/no gdp growth for a very long time, often attributed to their falling/aging population.

Unfortunately you seem to misunderstand how our pension system works. The UK runs a "Pay as you go" scheme not a fully funded one. Here is a paper on the arguments between the two systems: [http://www.ifs.org.uk/economic_review/fp184.pdf] When you are working you are supplying the money to be paid to pensioners who are currently retired (there is no large retirement pot/"system" you pay into. The Somalian with 10 children will be paying taxes through working/consuming and some of those taxes will go directly to state pension payments of the retired. The ratio between working age and retiree's is forecast to fall to 2.9 buy 2050 from 3.3 seen in the 1970's. This demographic trend alone suggests taxes related to pensions will need to/should have increase by 12% in this period. Accelerating this fall by hypothetically booting out all immigrants who, are dis-proportionally of working age would leave us with the choice of massively boosting taxes or scrapping the state pension.

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Flackwell 5th Aug '16 28 of 38

Absolute tosh - do you really think an immigrant with 10 children contributes even if working

Just shows you what drivel some people believe

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TangoDoc 5th Aug '16 29 of 38

In reply to post #145584

Unless they live rough, even students need housing and many do not leave when they should, disappearing into the black economy. Migration is natural animal survival behaviour. My own existence is despite potato blight in Ireland. We can't stop them coming by peaceful means. If they are prepared to risk drowning crossing the med, they'll not be stopped by the channel. You can even swim it!

The population will further rise because most recent arrivals are of child-bearing age and the postwar baby boomers are living even longer than their parents did.

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whitmad 18th Oct '16 30 of 38
5

Oh dear, I came to look at this thread to seek more enlightenment on peoples views on housebuilders. There are plenty of other fora for incessant ranting for/against immigration

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hayashi22 18th Oct '16 31 of 38

Fair comment whitmad -but clearly immigration is very germane to any discussion on housebuilders as a rising population will need more housing. As long as these people don't live anywhere near Tony Blair's various stately homes it will not be a problem as they will be out of sight and still vote Labour.

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Stephen Bland 19th Oct '16 32 of 38

In my long experience with shares, which is always from my first and undying love of a value perspective, macro concerns should hardly enter into consideration at all when evaluating an investment because they obfuscate, they don't add to the quality of the investment analysis. So talk of immigration etc. is all but irrelevant in my opinion when considering the merits of PSN etc.

What you need to look at is the basic fundies. P/E, Net tangible assets per share, yield, debt and the like. Fuggedabout about almost everything else. Don't try and predict the longer term future of the economy and then use that as a guide to the merit of the share. That will mislead you.

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thebuffoon 19th Oct '16 33 of 38
1

So what's your view on the market's house builders Stephen. Certainly the PE is low and the yield good on the majority of them.

Buffy

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Stephen Bland 19th Oct '16 34 of 38
2

In reply to post #155134

I don't want to give any views on individual shares for trading, I was just making some general observations on the way the analysis of housebuilders had been considered here, with the fundies seemingly taking second place to macro talk, whereas I think the fundies are overwhelmingly the most important feature of a share, especially for value players.

I can say that one of these shares, PSN, is currently a Buy in my HYP tipsheet The Dividend Letter but be aware that TDL is definitely not about trading, the HYP strategy is concerned only with holding shares forever for income.

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veganvader 2nd Dec '16 35 of 38
3

This is like reading the Daily Mail I thought the investors here were not the white radicalised brexit/trump supporting types but I was mistaken.
Uncertainty with a wide variation of outcomes.
Cost of labour and materials will rise.
Availability of suitable labour.
Devaluation of the pound means inflation is coming. Inflation means higher borrowing costs and less money for non-savers.
Government distracted from governing and focused on Brexit
I am holding PSN as I think it’s perfectly positioned for the type of housing the UK needs but don’t expect pre brexit levels for a few years.

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Flackwell 2nd Dec '16 36 of 38
2

Utter left wing drivel - if you believe that tripe vegan then logically you should be selling PSN and looking elsewhere

but like most left wingers you fail to practice what you preach

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peter lambert 7th Dec '16 37 of 38

Hi Tangodoc. Your original question was about what is happening to prices for FTS building companies rather than about immigration. My understanding about what is happening is that we have a short term reduction in demand following Brexit uncertainty, with signs of improvement now the PM has revealed her hand a little. My personal opinion is that these companies should be a good investment in the long term. Although demand for housing may fluctuate when buyers are nervous demand is generally high  in the UK. The stats for some building companies  look pretty good if you are investing long term and have the current advantage of being a wee bit cheaper than usual.

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peter lambert 7th Dec '16 38 of 38

P.S to my last comment.

Have just noted that shares in Berkeley have swung upwards quite sharply over last few days.

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