The rising imbalance across the UK housing market was laid bare once again by the Royal Institute of Chartered Surveyors (RICS) in Thursday business, data from which underlined the relentless growth in home prices.
The institute’s latest monthly house price balance report showed that 44% more surveyors reported price rises in July, up from 40% in the prior month and representing the highest level for a year. RICS noted that “the shortage of housing inventory worsened further during July, with the average number of properties for sale per surveyor slipping to a record low.”
With demand from new homebuyers also heading through the roof, RICS commented that “all areas of the UK are projected to see sizeable house price gains over the next twelve months.”
Constructing colossal earnings growth
Such news will come as music to the ears of housebuilders like Barratt Developments (LSE: BDEV) and Crest Nicholson (LSE: CRST), who the City expects to continue ratcheting up double-digit earnings growth in the years ahead.
And this comes as little surprise — Barratt Developments advised in its latest financial update that total completions leapt 10.8% during the 12 months to June 2015, to 16,447 units, while total forward sales galloped 29.6% higher to £1.8bn.
Crest Nicholson also noted in June that completions climbed 3% during October-June, to 1,124 homesteads, while forward transactions ascended 26% year-on-year to £436.4m. Although the country’s housebuilders are aggressively building up their land banks, the firms simply cannot construct at a rate to meet insatiable buyer demand, a scenario that should keep driving selling prices higher.
Ascendent estate agents
But it is not only the construction sector that is benefitting from ascending house prices. Property surveyors Countrywide (LSE: CWD) noted in June that, although uncertainty surrounding the recent general election stunted the number of transactions at its estate agents, that activity should pick up during the second half of the year.
A steady rise in the number of mortgage approvals certainly lends credibility to this theory — these hit a 15-month high of 44,488 in June, the British Banking Association (BBA) advised late last month.
Enjoying the fruits
And the major lenders like Barclays (LSE: BARC) are on the front line to enjoy the fruits of rising employment levels and wage increases on loan numbers, factors that helped drive total loans and advances at Barclays £500m higher in January–June to £217.5bn.
I fully expect earnings at all the firms I have mentioned to remain supported by surging house prices.
