Shares in construction plays Persimmon (LSE: PSN), Bovis (LSE: BVS) and Taylor Wimpey (LSE: TW) have enjoyed a splendid rise during the past few months, broadly speaking. Although fears of a cooling housing market have been doing the rounds more recently, signs of improved bullishness from industry experts should boost investor appetite for these “bricks and mortar” beauties still further, in my opinion.
The Royal Institution of Chartered Surveyors’ (RICS) latest survey released this week showed that respondents expect prices to rise an average 2.4% during the next 12 months, up from the expected 1.8% increase reported in January. And looking further ahead, the survey indicated that home prices are likely to rise by around 4.5% a year through to the end of the decade.
Although house prices rose across all of the country in February, RICS noted, this was not the case in London and values dipped for the sixth month in a row. Still, this is likely to prove a short-lived phenomenon as Britain’s housing crunch bites, the body said, and prices are likely to leap by 30% during the next five years.
Home sales galloping ahead
Indeed, each of Britain’s major housebuilders has indicated that the sector remains in good shape in their most recent financial updates. Taylor Wimpey announced just this month that “the beginning of spring selling season has seen trading at the better end of expectations,” adding that “the UK housing market remains healthy.“
While the UK election in May has cast some uncertainty over the industry, the business noted that each of the main political parties have placed curing Britain’s supply shortage near the top of their agendas, a promising omen for the industry. And boosted by an environment of low interest rates and high employment levels, Taylor Wimpey expects sales growth to remain buoyant — the construction firm has already executed 51% of forward private sales for 2015.
Mortgage demand remains solid
A backdrop of solid structural demand also bodes well for the country’s main mortgage providers like global banking giant Banco Santander (LSE: BNC). The company saw gross mortgage lending rise 43% in 2014, to £26.3bn, it noted last month, with the number of applications leaping 26% during the period.
The Spanish bank acknowledges that although some caution is emerging within the housing market, overall the sector remains robust with demand and house prices both on the rise. And with Santander following its peers in ramping up its mortgage product portfolio to attract homebuyers, I believe that the business — along with Britain’s major house creators — should continue to reap the rewards of climbing homebuyer activity.
