Housebuilders & Contractors: evidence of growing divergence in the wider housing market

There’s more evidence of a growing divergence in the wider housing market today, with most economic commentators going in one direction and the housebuilders steaming along in the opposite.

There has been much focus in the media over the impact of the Mortgage Market Review, what Mark Carney will say in the BoE’s Inflation Report tomorrow and a few people waking up to what the Financial Policy Committee might do reign in the housing in mid June (release due on 26 June).

The media has been reporting merrily on banks asking how much would-be borrowers spend on steak, haircuts and vets bills when assessing their mortgage applications, but little statistical evidence. A relatively low profile set of statistics from estate agency group LSL Property Services indicating house purchase approvals fell 6% between March and April, and blaming this on MMR.

There is speculation that the Inflation Report will signal a potential rise in rates in Q1 2015 tomorrow.

Other under-reported issues in the regulatory pipeline over the coming months include: a possible FPC move to curtail at least the second phase of Help to Buy (available in the secondhand as well as newbuild market); even tighter mortgage stress tests (possibly bringing all lenders to the “best in class”); and, more hazy, the possibility of the Treasury following some of the EU attempts to regulate Buy to Let lending

Nevertheless, Taylor Wimpey stated today that the:

“UK housing market continues to perform strongly, with sales rates and pricing at upper end of its expectations and it does not expect MMR to adversely impact its business”.

It outlined ambitious sounding mid-term margin and cashflow targets for 2015 – 17: 20% average op margins; at least 20% average RoNOA; and 15% annual growth in net assets.

This all adds to our view of volatility for the sector, but possibly in a more downwards direction.