Building materials play Travis Perkins (LSE: TPK) underlined the long-term strength of the UK housing market last week by announcing a huge expansion programme across London and the South-east.
The Northampton-based company — which also owns the Wickes, Toolstation and Benchmarx outlets — said that it plans to create 4,000 jobs during the next four years by opening another 400 stores. This comes on top of the 24,000 people the business already employs across 2,000 branches, with the cost of this programme estimated at between £150m and £200m per year.
Following the news, chief executive John Carter noted that the move “reflects confidence in our businesses, the markets we operate in and the UK economy as whole,” adding that “a number of actions taken by the Government over the past two years, including the new Help to Buy ISA… are continuing to support construction activity and improvements in consumer confidence.”
Build a fortune with the construction sector
I have long argued that a worsening supply crunch in the British housing market should continue to underpin strong sales growth across the sector, and Travis Perkins’ aggressive investment scheme provides further evidence of this.
Signs slowing house price growth in recent months has failed to temper the popularity of housing stock with investors, and I for one ploughed into the sector back in 2014 when I bought stock in both Barratt Developments (LSE: BDEV) and Taylor Wimpey (LSE: TW). And I believe that sector peers Persimmon (LSE: PSN) and Bovis Homes (LSE: BVS) are also in rude shape to enjoy solid earnings growth as buying demand looks set to keep outpacing the rate at which homes are being put up.
Regardless of the outcome of May’s general election, the UK’s housing shortage will be near the top of the agenda for any incoming government. Politicians realise that helping first-time buyers get their foot on the ladder is a vote-winning formula, and I expect Westminster to ramp up its support of housebuyers in forthcoming Budgets.
At the same time Britain’s major banks and building societies continue to slash interest rates and charges across many of their products, making their mortgages more and more affordable for the average buyer. And with the Bank of England now expected to keep interest rates at record lows well into 2016 at the earliest, I expect lenders to keep on improving their products in this ultra-competitive area, a terrific omen for future house sales.
Royston Wild owns shares of Barratt Developments and Taylor Wimpey. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.