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Help to Buy helps boost housebuilders' shares Help to Buy extension boosts housebuilders' shares
(about 5 hours later)
An extension in taxpayer support for the property sector helped Britain's biggest housebuilding firms add to gains in share prices, which in some cases have doubled since the start of last year. An extension in taxpayer support for the property sector through the Help to Buy scheme prompted big jumps in the shares of Britain's biggest housebuilding firms – which in some cases have doubled since the start of last year.
The four biggest listed companies have increased in market value by 81%, or £7.2bn, over the period, during which the government introduced the Help to Buy scheme.The four biggest listed companies have increased in market value by 81%, or £7.2bn, over the period, during which the government introduced the Help to Buy scheme.
The chancellor, George Osborne, will now extend an equity loan part of the initiative – which had been due to end in 2016 – until the end of the decade. It will mean another £6bn invested to help an estimated 120,000 more households purchase a newbuild home. Monday's fresh rises came after a weekend announcement by the chancellor, George Osborne, that the equity loan part of the initiative – which had been due to end in 2016 – would be extended until the end of the decade. It will mean another £6bn invested to help an estimated 120,000 more households purchase a newly built home.
A separate element of Help to Buy introduced last year offers lenders £12bn of mortgage guarantees to lure them back into making high loan-to-value ratio advances of up to 95% of the value of homes. Shares in the FTSE 100-listed builder Persimmon climbed nearly 4% as traders digested the implications of Osborne's announcement. Persimmon's value has already surged by about £2bn, or more than 75%, to £4.3bn, since the start of 2013.
Shares in the FTSE 100-listed builder Persimmon climbed nearly 7% as traders digested the implications of Osborne's latest announcement. Persimmon's value has already surged by about £2bn, or 77%, to £4.3bn, since the start of 2013.
Barratt, listed on the FTSE 250 Index, rose 3%. Its market capitalisation has doubled since the start of last year, to nearly £4.2bn.Barratt, listed on the FTSE 250 Index, rose 3%. Its market capitalisation has doubled since the start of last year, to nearly £4.2bn.
Taylor Wimpey climbed 4%. Its value has risen by 84%, or £1.8bn, over the same period, to £3.9bn. Berkeley, which lifted 2%, has grown in value by £1.3bn, or 54%, since the start of last year, to reach £3.7bn. Taylor Wimpey climbed 2%. Its value has risen by more than 80%, or £1.8bn, over the same period, to £3.9bn. Bovis Homes were up at 895p, from 667p a year ago, a 67% increase, taking its market value to £1.2bn.
Housebuilders' shares have been steadily climbing over the past year or so, aided by improvements in the overall economy. They have stuttered in recent weeks amid question marks over the sustainability of the revival. The surge is being monitored by the Bank of England, which has pledged to intervene should it threaten to overheat. A separate element of Help to Buy introduced last year offers lenders £12bn of mortgage guarantees to lure them back into making high loan-to-value ratio advances of up to 95% of the value of homes. This has not been extended.
Housebuilders' shares have been steadily climbing over the past year or so, aided by improvements in the overall economy as well as Help to Buy. They have stuttered in recent weeks amid question marks over the sustainability of the revival. The surge is being monitored by the Bank of England, which has pledged to intervene should it threaten to overheat.
Last week the Bank's deputy governor, Charlie Bean, said policymakers were keeping a "beady eye" on the market, warning that a lack of supply combined with excessive growth in mortgage lending could create future financial stability risks.Last week the Bank's deputy governor, Charlie Bean, said policymakers were keeping a "beady eye" on the market, warning that a lack of supply combined with excessive growth in mortgage lending could create future financial stability risks.
The warning weighed on shares, but Osborne's intervention before his Budget speech on Wednesday was enough to provide a sharp boost. The warning weighed on shares, but Osborne's intervention before his budget speech on Wednesday was enough to provide a sharp boost.
This month the mortgage lender Halifax reported that house prices in February rose at their strongest annual rate since 2007, up 7.9% on a year ago to £179,872, though average values were still 10% below their 2007 peak.This month the mortgage lender Halifax reported that house prices in February rose at their strongest annual rate since 2007, up 7.9% on a year ago to £179,872, though average values were still 10% below their 2007 peak.
Some fear it could mean Help to Buy backfiring by pushing up prices beyond the means of some of those – such as first-time buyers – whom it is intended to assist. There are concerns in particular that the second phase of the scheme – the mortgage guarantee offered on new and existing homes worth up to £600,000 – is pushing prices too high in London and the south-east.Some fear it could mean Help to Buy backfiring by pushing up prices beyond the means of some of those – such as first-time buyers – whom it is intended to assist. There are concerns in particular that the second phase of the scheme – the mortgage guarantee offered on new and existing homes worth up to £600,000 – is pushing prices too high in London and the south-east.
The Bank's governor, Mark Carney, has already said he is watching the housing market closely for signs that a bubble may be emerging and that policymakers stand ready to raise rates if needed to curb prices.The Bank's governor, Mark Carney, has already said he is watching the housing market closely for signs that a bubble may be emerging and that policymakers stand ready to raise rates if needed to curb prices.
The mortgage element of the state-run Funding for Lending scheme, offering banks cheap access to finance in order to lend to homebuyers, ended at the beginning of the year to help rein in the burgeoning market.The mortgage element of the state-run Funding for Lending scheme, offering banks cheap access to finance in order to lend to homebuyers, ended at the beginning of the year to help rein in the burgeoning market.
But despite the worries over the effects of Help to Buy, there are some signs that the housing market bounce-back may be stabilising. The Royal Institution of Chartered Surveyors recently reported that the surge in demand from potential buyers was starting to show signs of "exhausting".But despite the worries over the effects of Help to Buy, there are some signs that the housing market bounce-back may be stabilising. The Royal Institution of Chartered Surveyors recently reported that the surge in demand from potential buyers was starting to show signs of "exhausting".