Transactional volumes in the existing housing market in the UK have been slowly declining for some time now. By contrast, the new-build sector is going from strength to strength, with Persimmon (PSN) and MJ Gleeson (GLE) the latest companies in the sector to report strong trading. The investment case for McCarthy & Stone (MCS), however, looks less certain.
On the new-build side, Persimmon increased legal completions by 8 per cent in the first half of 2017, thanks in part to the relative affordability of its homes, which have an average selling price of £213,000. Operating margins are expected to be significantly higher in the second half than the 26 per cent achieved a year earlier.
Progress at MJ Gleeson, which builds affordable houses for people on low incomes in the north of England, has been even more impressive. Sales were up 12 per cent in the first half to 1,013 - a target management plans to double within five years.
McCarthy & Stone took a knock after a fall in transactional volume in the wake of last year's referendum. The momentum has returned since then, although there may still be a modest impact on the timing of converting existing reservations into completions. Despite a lower number of new sales sites released - 39 down from 58 - total forward sales are now back up to the previous year.
There are several reasons behind this disconnect in housebuilders' performance. In some cases, existing homeowners are finding it expensive to move up the housing chain, as a result of house price inflation. In the case of homes costing over £500,000, there is the burden of higher stamp duty. In addition, the help-to-buy scheme applies only to first time buyers and not to existing homeowners.
