The share prices of some of Britain’s homebuilders took a hit late last week after reports emerged of possible changes to the government’s Help To Buy scheme.
Industry bible Property Week reported on Friday that the Department for Communities and Local Government (DCLG) has employed the London School of Economics to help in its review of the programme. Measures rumoured to be up for consideration include restricting eligibility to first-time buyers and properties under a certain selling price, right through to axing the scheme in its entirety.
The purchasing scheme has been a critical lynchpin in driving house-buyer demand for some years and is responsible for 38% of all completions right now, according to broker Liberum Capital.
However, a statement from the DCLG suggests to me that last week’s hurried sale of housing stocks could be a knee-jerk reaction.
A department spokesman commented in response to the report that “we have committed £8.6bn for the scheme to 2021, ensuring it continues to support homebuyers and stimulate housing supply.” He added that “we also recognise the need to create certainty for prospective homeowners and developers beyond 2021, so will work with the sector to consider the future of the scheme.”
Besides, even if Help To Buy were to find itself on the chopping block, there is no guarantee that the removal of this sweetener would actually prompt a collapse in homes demand.
Stunning value, stunning yield
Berkeley Group (LSE: BKG) is one such stock that found itself on the defensive at times on Friday, although it recovered to finish fractionally higher on the day.
The Cobham-based builder remains on a broad uptrend, the stock hitting 18-month peaks above £35.30 per share late last week. But the company still offers pretty good value for money based on current City forecasts.
Despite predictions of a 1% earnings dip in the year to April 2018, Berkeley still trades on a bargain-basement forward P/E ratio of 7.7 times, a figure that I reckon more than bakes-in any threats facing the housing market.
And the company also offers plenty for income chasers to get excited about, a predicted 194.3p per share dividend chucking out a staggering 5.5% yield.
Cheap and cheerful
Credit provider International Personal Finance (LSE: IPF) is another share yield-hungry investors need to check out.
Like Berkeley, the Leeds-based leviathan is expected to endure some earnings pressure in the near-term, a 6% dip currently predicted by City analysts. Still, this is not expected to hamper the company’s ability to hike the dividend to 12.9p per share, resulting in a mammoth 6.3% yield.
Moreover, current earnings predictions also leave International Personal Finance changing hands on a mega-low prospective P/E multiple of 6.9 times.
The business saw revenue climb 3% between January and June, to £400.8m, it announced in July, while the amount of credit it issued advanced 10% from the corresponding 2016 period. This drove pre-tax profit 30% higher to £43m.
Sure, it still faces some uncertainty owing to possible regulatory changes in Eastern Europe. But I reckon the progress the company is making in Mexico and more broadly at its IPF Digital division both provide plenty of reason for optimism. And the company is rapidly expanding all over the world to keep revenues heading skywards – it shelled out £8.7m in the first half to build its new markets of Poland, Spain and Australia as well as Mexico.
