Assetz® News - Housebuilders optimistic about property market

Housebuilders optimistic about property market

11th January 2006 |

Adding weight to the declaration from the National Association of Estate Agents (NAEA) that the property market is now "back on track" after a difficult 2005, housebuilders have reported that demand has started to pick up.

By all accounts, 2005 was a challenging year for the market but property investors have been enthused by its ability to successfully avoid a crash. High house prices in the last two years seem to have intimidated many homebuyers but reports in the last month have almost unanimously agreed that the situation has been remedied.

The cut in interest rates in August 2005 was crucial to this upturn, with many companies reporting a general increase in consumer confidence and cheaper mortgage loans.

The NAEA is the most recent organisation to have made this point, but Nationwide and Halifax have also observed the same trend and are both predicting steady rises in house prices this year.

The confidence boost now seems to have filtered through to homebuilders, although many companies are remaining understandably cautious on the back of a difficult 18 months.

Taylor Woodrow is one of the world's biggest housing and development groups and it is anticipating 2005 profit to be in line with market expectations. In an interview with Reuters, chief executive Iain Napier revealed his predictions for the year.

"In the UK, it's too early to be completely bullish about 2006. We are very cautiously optimistic," he said today.

"In October, November and December, the number of visitors increased substantially, and we are hopeful that the momentum will be maintained in the spring selling season," he added.

Mr Napier's assessment is comparatively reserved, with Reuters reporting that property consultant Savills was even more enthusiastic about the market recovery based on an "exceptionally strong" December. Shares in the company have risen by around five per cent, with improvements in the London market contributing significantly to this development.

"After a slow start to the year, momentum in the prime residential markets strengthened in the second half of 2005, with a marked upturn in activity in the last quarter and our under-offer book ahead of the same period in 2004," Savills said in an update today.

In contrast to some of the dramatic rises in house prices during the last five years, Halifax is forecasting that prices will climb by around three per cent during 2006, which is only slightly higher than inflation. As the market settles down, property investors are generally pleased with this prediction, as it casts aside fears of a sudden slump or crash in the market.

In a note to Reuters, NCB Stockbrokers revealed that 2006 could prove to be a lucrative year for property investors if events follow predictions.

"The trading updates indicate encouraging prospects for 2006 as demand and completion rates begin to pick up. If sustained, this demand will trigger sector earnings upgrades as the year progresses."