House prices on existing homes may still be in the doldrums, but there is no holding back the major housebuilders. The seven largest all delivered a strong operating performance so far this year, despite the rain that's been falling since April, and little sign of a thaw in the mortgage market. And shares in four of them still trade at less than net assets.
Sales have pushed ahead, but self-help, cheaper land and a change in the product mix are the main factors behind this performance. Margins continue to improve as more cheap land - picked up after land values crashed - is utilised, while builders are completing fewer apartments and more higher-margin family homes. They have also been increasing their exposure to the south east of England, where potential buyers have more money and where prices on new houses have continued to rise.
| Company | In January (p) | At peak (p) | Now (p) | NAV (p) |
| Barratt Developments | 92 | 151 | 137 | 301 |
| Bellway | 705 | 859 | 826 | 899 |
| Berkeley | 1,264 | 1,426 | 1,387 | 838 |
| Bovis | 432 | 518 | 469 | 545 |
| Galliford Try | 484 | 653 | 645 | 573 |
| Persimmon | 471 | 706 | 628 | 608 |
| Taylor Wimpey | 37 | 52 | 47 | 57 |
Shares in all the housebuilders rose significantly in the first quarter and peaked in May, at which point prices fell in line with a sharp fall in equity markets in general. After a recent rally, they are all ahead of the level they started the year - yet with the exception of Berkeley, Persimmon and Galliford Try, they are all still trading at a discount to net asset value (NAV).
But it still pays to be selective. Taylor Wimpey, for example, has reduced its debt pile significantly and restored the dividend. But the 10p a share discount to NAV remains dependent on a 10.8p a share deferred tax asset, while the group's pension deficit has more than doubled in the past year to £523m, and that will act as a drag on the share price.
