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COMMENT
"I don't believe it!" Surely everybody knows today's housing bubble is ready to burst. And surely everybody knows the mid-cap buy-to-let mortgage lender will be among the main casualties. For example, I've written all these articles on the subject!) But while the property market continues to defy gravity, Paragon and its share price make handsome progress. Today's interim headlines showed earnings per share up 11%, the dividend up 33%, buy-to-let assets up 25% and the start of a £20m share repurchase programme. Hardly a company on the brink of disaster, eh? Furthermore, Paragon claims there's been strong growth in buy-to-let applications of late, which 'bodes well' for volumes in the second half of the year. By mid-morning, Paragon shares had added 5% to 385p on the upbeat details. That's right: "I don't believe it!" Paragon's most recent landlord survey also inspires a Meldrewesque reaction. According to the firm's April study, the previous twelve months had witnessed average rents increase 9% and the average tenanted property gain 14%. What's more, average rental yields were 7%. These statistics however look rather generous when compared to figures from Nationwide, Halifax, the Association of Residential Letting Agents and the experiences of most amateur landlords. Cue Victor! Despite today's update, frothy markets built on borrowed money always have the same ultimate outcome. Paragon's shareholders and recent customers will I'm sure suffer some financial misfortune sooner or later. Remember, National Home Loans (as Paragon was called pre-1997) suffered badly from mortgage arrears, negative equity and repossessions during the last housing downturn. Losses were racked up, the dividend was axed and the shares crashed. I bet a repeat of that would satisfy the buy-to-let Meldrews.
Victor Meldrew could have been a fine City analyst. Results from Paragon (LSE: PAG) this morning would have had the cantankerous old codger screaming into his RNS feed.