Bargain Basement Builders Poised For Election Year Love In U.K.
By Inyoung Hwang
With valuations the cheapest in four years and Conservatives and the Labour Party both voicing support for housing before next month?s election, the ground is getting firmer beneath U.K. homebuilders.
A rally for the industry in 2015 hasn?t been enough to lift price-earnings ratios to even half the average for the FTSE 350 Index, data compiled by Bloomberg show. Persimmon Plc and Taylor Wimpey Plc, among the biggest builders by market value, have advanced more than 11 percent this year and still trade below valuations of a year ago. The FTSE 350 fell 0.2 percent at 9:55 a.m. in London.
With elections looming on May 7, Britain?s political parties have promised to address a shortage of homes and maintain government programs designed to fuel purchases. Consumer sentiment at a 13-year high and speculation that the Bank of England will delay raising rates will give a further boost, said Dan Nickols of Old Mutual Global Investors U.K., who has been overweight on the sector for about two years.
?We?ve consistently failed to build enough houses in the U.K. and that creates real pressure,? said Nickols, who helps manage 15 billion pounds ($22.5 billion) at Old Mutual in London. ?There simply isn?t enough housing stock to satisfy demand.?
Multiples for the group based on reported profit slid as the housing market cooled last year and officials introduced measures to limit riskier mortgages. U.K. property-related companies are among the most loved by analysts. They rate them a 4.17 on average on a scale where 5 equates to a unanimous buy recommendation.