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Next year will be the toughest year for the property market, Im an estate agent in London and have seen a large change in buyer sentiment. I’m not sure how much of a correction there will be, but there will be one. The lag time from the QE package will take us to April/May next year when we will see the full effect. The autumn budget is going to be instrumental in how the market will fair next year, a cut in stamp duty will help. However the biggest factor for me is the help to buy scheme ceasing, this was such a huge percentage of house builders books which has now just fallen off a cliff. I have the long term view that crest like persimmon have acquired swathes of quality land for development in the future, we still do not build enough homes in the uk so long termhouse builders will still perform well, but it most certainly be short term pain for long term gain.
I bought 50,000 shares of Crest at 172, so I’m currently about 10% under water, but I’m not phased in the slightest.
I paid exactly half book value, so I’m happy with the price I paid. Sure, it would’ve been nice to get in cheaper but hey-ho, I’ll buy some more at a bigger discount. Now the market cap is sub £400m, with about £850m net tangible assets on the balance sheet, this will get a takeover bid I reckon, most likely from BKG- They’d be daft not to.
Money line,
Re help to buy, Crest has just partnered with legal and general to launch its own scheme which is very similar help to buy.
https://www.warwickshireworld.com/lifestyle/homes-and-gardens/local-warwick-homebuyers-benefit-as-crest-nicholson-launches-new-shared-ownership-scheme-4383385
Registerme,
Its an interesting scheme, the shared ownership model does only make up a very small percentage and the shared ownership schemes never seem to sell as well in London, cant say much about outside of London however.
The help to buy was a different beast that counted for so much in london for one and two bed flats at £600,000 and below.
Its a simply Supply/Demand example though, over the course of the next 10 years we will require more homes and we never keep pace with new homes being built in line with the demand that is still strong. House builders will invariably have to weather the storm of the market for the short term. I think its an interesting take to consider a potential takeover, yet there isnt the market currently to make this worthwhile, land is being banked in readiness for lowering inflation and interest rates, which hopefully will be on the horizon next year. Still think housebuilders are well priced at the moment, yet there may be further to fall for many.
Money line,
What struck me about this shared ownership scheme was that other housebuilders don’t seem to be offering it, and it’s not available on pre owned homes, which give crest a competitive advantage in a market where buyers are few and far between.
From the HB’s perspective it’s just as good as help to buy because it’s more affordable per month for a FTB, and the deposit is still 5% (10% of the 50% share).
The total monthly payments will be lower on this new scheme because they buyer is making payments on a 45% mortgage + 0.23% per month (2.75% p/a) on the rented 50% share. This will be cheaper per month than both traditional renting, and paying a regular mortgage, with or without HTB.
Money line,
What makes you think there wouldn’t be a market to take crest over? BKG only operates in the south, where all of crests land bank is held. They have £1070 cash sitting on their balance sheet. Crest has £847m net tangible assets. BKG could offer a 50% premium on crest share price (£600m total) and still get all of crests land bank at a circa 30% discount.
Registerme,
Shared ownership is available on the secondhand market, there are usually restrictions for people living and working within the area for a certain amount of time and also the max earnings people can have. I agree it’s an interesting scheme however still having to pay rent along with a mortgage is a broken way of buying a property in my opinion. I’ve sold shared ownership homes and they are a nightmare to shift, no one wants them, granted in the area of London it may be somewhat different. The schemes however are completely different and will make little impact.
I’m down a little on my position but will be averaging my investment every couple of weeks, I still think house builders could slip further but hopefully the autumn budget can bring positive news. Once inflation comes under control and interest rates come down, house builders will very much be back in favour. I agree on the land crest has is lucrative, but other house builders have been doing the same. BKG would not want to over leverage their land position in the short term.