The UK’s listed housebuilding sector posted a record-high market value of £32.8bn in 2015 - a 40% jump on 2014 and almost 1,000% above the depths plumbed during the financial crisis, reveals research by consultant Building Value.
On the back of strong demand, low interest rates and favourable
government policies, the sector broke new ground 35 times during the course of
the year, setting the new record value
on 30 December.
The addition of retirement specialist McCarthy & Stone, which
returned to listed status on 5 November and increased 41% in value to £1.4bn by
year end, takes the total value to just north
The sector has now increased in value by almost 1,000% - or £30bn in cash terms - from the trough on 7 July 2008.
Housebuilder share prices increased by an average of 40% in 2015 when weighted by market capitalisation, compared with 19% in 2014, and the strongest year-on-year growth was posted in the third quarter (58%) - narrowly up on 55% growth in Q2.
Tony Williams, Building Value chief executive, said housebuilders
had enjoyed an “extraordinary” year. “By any measure housebuilders have led
all other would-be equity champions,” he said.
Redrow showed the biggest leap in value with a 59% jump over the year, followed by Abbey (52%) and Berkeley (49%), while Bovis and Telford posted the most muted performances of the bunch, with rises of 15% and 11% respectively.
Bellway (14.1%), Abbey (13.4%) and Berkeley (10.4%), which all reported figures in the final quarter, posted the strongest growth in Q4. However, Crest Nicholson, Barratt and Telford all dipped into negative territory in the last quarter.
Housebuilders have by far outperformed all other equities over the year with a 40% rise in value - the next-best-performing sector was construction and building materials (25.1%),
while real estate investment services (REIS) posted a 15.5% rise.
By comparison, REITs increased in value by 7.36% over the year, while the general equity markets were all in negative territory.
The year saw the addition of Berkeley into the FTSE 100, alongside Persimmon, Barratt and Taylor Wimpey. The latter three are each worth in excess of £6bn and together account for more than half (56%) of the value of the housebuilding sector. Berkeley was valued at £5.1bn at year end.
The analysis comes after a separate study by Funding Options showed that average profit margins at the UK’s largest housebuilders rose to 11.7% over the past financial year - rising above the pre-credit-crunch peak of 11.2% set in 2007.
Nevertheless, supply is still falling well short of demand, with 460,000 new homes built between 2011 and 2014, compared with the 974,000 required, according to the National Housing Federation, and around 160,000 completed in 2015, well short of the 220,000-250,000 most experts say is required.
Williams warned that with construction activity continuing to lag behind demand, prices were likely to continue to rise, exacerbating the current affordability crunch and potentially slowing down the market.
He added that first-time buyers might hold off buying until the impact of the government’s 3% hike in stamp duty on buy-to-let purchases was felt in the hope of finding better deals.