Fears of a prolonged slowdown in house price growth has failed to significantly dent confidence in the housebuilding sector, and shares in the countrys major players have strode comfortably higher in recent months. And the segment received a further shot in the arm after the Conservatives cakewalk in this months general election lifted any long-term uncertainty for the market.
Despite the sectors ongoing strength, however, I believe that the housebuilders remain a lucrative place to stash your cash as the homes market continues to gain traction. Indeed, latest data from the British Bankers Association (BBA) showed mortgage approvals surge 7% in April, representing the biggest rise since autumn 2013. And the 42,116 approvals inked last month represents the largest number since last June.
There was a significant pre-election jump in mortgage approvals which we would expect to continue in the coming months, BBA chief economist Richard Woolhouse noted. With wages and employment levels continuing to improve, inflation expected to rumble along at record lows well into 2016 at least, and lending conditions becoming ever-more accommodating, such a bubbly outlook is hardly a surprise.
Homes demand shooting higher
This strong forecast no doubt comes as no surprise to the sectors most prominent operators. Wycombe-based Taylor Wimpey (LSE: TW) announced in April that the strong start to the spring selling season has continued, with high levels of customer confidence and an affordable mortgage environment contributing to a positive trading environment. The business commented that it was 67% forward sold for completions for 2015 as of the close of April.
And this followed positive updates from a slew of other sector peers Bovis Homes (LSE: BVS) noted just this month that it has traded well to date during 2015, adding that the UK economy remains positive with good quality home buyers able to access cost effective mortgage finance. And Bellway (LSE: BWY) recently commented that customer demand for new homes has remained robust throughout the country, a phenomenon that helped drive total revenues 18.7% higher during August-January, to 831.2m.
Build on solid foundations
Of course a robust housing sector bodes well for a number of related industries, and materials supplier Travis Perkins (LSE: TPK) is one of those benefitting from a healthy homes market. The company which also operates the Wickes and Toolstation outlets announced plans to add another 400 stores to its 2,000-strong portfolio over the next four years on the back of strident housebuilding activity. Travis Perkins saw total revenues advance 8.4% last year, to 5.6bn.
And with consumers finding more money in their pockets, I expect lending activity at lenders like Banco Santander (LSE: BNC) to continue ticking higher, too. Indeed, the Spanish bank saw mortgage lending advance 1% during January-March, a result that helped push total UK lending 5% higher during the period. And with Santander pulling out all the stops to improve its range of mortgage products, I fully expect lending to keep stepping steadily higher in line with spritely homebuyer demand.
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