Collapse of the UK housing market

[Charlottesquare]

Your were robbed, my Dad bought our family home (A three story 11 room (inc 1 Kitchen and 1 Bathroom) sandstone Edwardian property in Learmonth) for £6,700 in 1967.(Sold for £50,000 in circa 1981/82, would now be well over £1m)

I couldn't have afforded £6700! Only the husband's income was counted, and I just about managed a 3 times income mortgage, supplemented by a generous deposit from my father-in-law.

My Dad was the only one working, my mum gave up practicing when we started arriving from the mid 50s onward, he also likely had decent earnings as a partner in an Edinburgh firm of solicitors (Building Socs were very obliging to solicitors as they fed them lots of business) and it was the fourth house they had owned since getting married in the early 50s so I imagine they had built up reasonable equity.

[1nvest]

Nationwide are reporting that house prices fell by 5.3% annually to August 2023,

Property values fell by 0.8% month-on-month in August 2023

A year ago and https://www.gov.uk/government/statistic ... ugust-2022

The annual price change for a property in the UK was 13.6% The monthly price change for a property in the UK was 0.9%

Nationwide said house prices are now 5.3% below their August 2022 peak.

[Mike4]

Nationwide are reporting that house prices fell by 5.3% annually to August 2023,

Property values fell by 0.8% month-on-month in August 2023

A year ago and https://www.gov.uk/government/statistic ... ugust-2022

The annual price change for a property in the UK was 13.6% The monthly price change for a property in the UK was 0.9%

Nationwide said house prices are now 5.3% below their August 2022 peak.

Given the annual fall has reduced this month, does this mean there has been (roughly) no fall over the last month, the month measured in isolation?

Also, I guess they are quoting the whole of the housing market geographically. There seems to have been no falls at all around here (rural Wiltshire) given the speed with which houses coming on the market go under offer. Typically just a few days, I notice.

[dealtn]

Given the annual fall has reduced this month, does this mean there has been (roughly) no fall over the last month, the month measured in isolation?

No it doesn't mean that because you have 11 of the 13 months in both sequences, so the change in the annual rate can be in month 1 (dropping out) or 13 (coming in) to an annual measurement.

[1nvest]

Looks to me that those proclaiming house prices crash (of -5%, from prior extreme highs such as +13% gains being reported a year ago), job losses ...etc. are more a case of just talking the talk.

As/when the digital Pound is imposed, so might that also weaken what control/influence the central bank has over things. Alongside digital Pounds, that the state can control what/where you spend etc., so also will 'better' alternatives tend to rise and be more commonly preferred. Potentially ending up with digital Pounds predominate use only being as a quick means of exchange, between being paid benefits or paying taxes in digital pounds, and exchanging the rest for Google-coins or whatever (made up digital currency). Where google-coins aren't inclined to lose purchase power (via inflation - which is just another form of taxation), and may very well instead increase in purchase power, and where they're more portable - Spanish holiday and ... look a bottle of beer is only 2 google-coins here when we're paying 4 at home in the UK.

The UK media however continue to talk down the UK, are suggesting house prices crashing, unemployment rising, Pound crashing ....etc. Largely supported by Civil Servants who also would prefer that the UK rejoined the EU. On the ground however and whilst we've seen a Ukraine war dip, such that the likes of safe Index Linked Gilts are now priced to around 1% real yields, the suggestion to take from that is if safe are paying a small real yield, then so might riskier assets see higher/better rewards to come. Perhaps in another year stocks, house prices etc. will have turned the corner and be seeing significant gains. Some see recent stocks/house prices at potential relative lows - which in turn is a resistance to further declines. I'd also imagine that there is political will to have pain now, and a return to good times in a year or so ... in order to align with a general election.

There's a lot of surplus cash out there, all too willing to jump in and 'invest' that - as others have indicated, some 'regular' houses going for sale are selling very quickly. I suspect the ones that are slower to sell are the former rental housing, as the state seems intent on driving landlords out of the market - which is inclined to drive rents up even higher.

[EviesDad]

We have been trying to sell my late mother's house since late March but the market seems dead as a dodo in that area (south coast on the edge of the new forest).Have already reduced the price by 8.7% but may have to reduce further. Had plenty of viewings and positive feedback but almost all viewers are not in position to offer because they haven't had an offer on their own property. The very few that are in position to buy have a glut of properties to choose from so it tends to be the giveaway bargains that are selling.

[vand]

-5% annualised fall is very much "crash cruise speed" when we are talking about the housing market. Factor in an average of 3% inflation makes it an 8% real decline. At that rate 34% gets wiped off in real terms over 5 years, which is (imo) a very possible - even probable - scenario.

I know the HPC crowd would like to see it happen quicker, while the bulls would prefer for it not to happen at all, but that's what I think is going to happen, and ultimately there'll be something in it for both sides.

Houses being a third cheaper vs wages would ibetter for nearly everyone - we would all spend less of our income on housing and have more left over for other things.

[scotview]

I thought one post following another was amusing (highlighted yellow) ....but maybe prophetic.

[AsleepInYorkshire]

I prepared a graph of new home completions from information taken from the ONS website.

Probably hanging on the fringe of this discussion but perhaps of some interest?

The private completions (orange) seem to be the most intersting to me. The peaks and troughs clearly demonstrate a cyclical industry. However, and perhaps worthy of note is the maximum output of the industry at the top of the cycle. Could this suggest the industry output is not only dictated by other macro economic events but is a reflection of the ability of the economy to be able to allow [some of] us to purchase new homes?


AiY(D)

[BullDog]

I prepared a graph of new home completions from information taken from the ONS website.

Probably hanging on the fringe of this discussion but perhaps of some interest?

The private completions (orange) seem to be the most intersting to me. The peaks and troughs clearly demonstrate a cyclical industry. However, and perhaps worthy of note is the maximum output of the industry at the top of the cycle. Could this suggest the industry output is not only dictated by other macro economic events but is a reflection of the ability of the economy to be able to allow [some of] us to purchase new homes?


AiY(D)

Soon time to buy Ibstock or Forterra shares, but not just yet? I'm surprised the house builders shares aren't a lot lower than they are. But they all buy bricks.

[AsleepInYorkshire]

I prepared a graph of new home completions from information taken from the ONS website.

Probably hanging on the fringe of this discussion but perhaps of some interest?

The private completions (orange) seem to be the most intersting to me. The peaks and troughs clearly demonstrate a cyclical industry. However, and perhaps worthy of note is the maximum output of the industry at the top of the cycle. Could this suggest the industry output is not only dictated by other macro economic events but is a reflection of the ability of the economy to be able to allow [some of] us to purchase new homes?


AiY(D)

Soon time to buy Ibstock or Forterra shares, but not just yet? I'm surprised the house builders shares aren't a lot lower than they are. But they all buy bricks.

Yes, was looking at another purchase of Forterra this morning. Price fell off further today with no news flow. Just need to refresh on their latest numbers. Happy to buy them as they travel south and aggregate the overall buying price.

Noting that Gleeson Homes last shareholder day mentioned they were still struggling for bricks at the "right price".

AiY(D)

[BullDog]

Soon time to buy Ibstock or Forterra shares, but not just yet? I'm surprised the house builders shares aren't a lot lower than they are. But they all buy bricks.

Yes, was looking at another purchase of Forterra this morning. Price fell off further today with no news flow. Just need to refresh on their latest numbers. Happy to buy them as they travel south and aggregate the overall buying price.

Noting that Gleeson Homes last shareholder day mentioned they were still struggling for bricks at the "right price".

AiY(D)

Forterra or Ibstock then. You favour Forterra? I guess there's some imported bricks yet to drop out of the UK market. With Russian gas now severely restricted European brick makers have lost the cheap energy that gave them the edge in manufacture. Higher fuel costs means more expense shifting tonnes of bricks a long way.

[AsleepInYorkshire]

Yes, was looking at another purchase of Forterra this morning. Price fell off further today with no news flow. Just need to refresh on their latest numbers. Happy to buy them as they travel south and aggregate the overall buying price.

Noting that Gleeson Homes last shareholder day mentioned they were still struggling for bricks at the "right price".

AiY(D)

Forterra or Ibstock then. You favour Forterra? I guess there's some imported bricks yet to drop out of the UK market. With Russian gas now severely restricted European brick makers have lost the cheap energy that gave them the edge in manufacture. Higher fuel costs means more expense shifting tonnes of bricks a long way.

I can't recall why I opted for Forterra.

Some information here from 11th April 2023.

AiY(D)

[BullDog]

Forterra or Ibstock then. You favour Forterra? I guess there's some imported bricks yet to drop out of the UK market. With Russian gas now severely restricted European brick makers have lost the cheap energy that gave them the edge in manufacture. Higher fuel costs means more expense shifting tonnes of bricks a long way.

I can't recall why I opted for Forterra.

Some information here from 11th April 2023.

AiY(D)

Thanks. Your comments are timely since I have been thinking of buying a small stake in one or the other brick maker. Of the two I have tended to favour Ibstock. From my very amateur findings it looks to me like Forterra is at greater risk of a dividend cut. It looks to me like Ibstock is more likely to maintain dividend and perhaps start to grow them beyond the short to medium term.

I have been looking for a cyclical opportunity in house building. But I find it very hard to identify the best candidate from all the quoted builders. Hence the main reason for thinking about a small buy of a brick maker. Simply because they all buy bricks.

I hold no other similar company, the closest being Morgan Sindall who have the Lovell business. But it's not really into speculative house building and certainly doesn't make bricks.

[AsleepInYorkshire]

I can't recall why I opted for Forterra.

Some information here from 11th April 2023.

AiY(D)

Thanks. Your comments are timely since I have been thinking of buying a small stake in one or the other brick maker. Of the two I have tended to favour Ibstock. From my very amateur findings it looks to me like Forterra is at greater risk of a dividend cut. It looks to me like Ibstock is more likely to maintain dividend and perhaps start to grow them beyond the short to medium term.

I have been looking for a cyclical opportunity in house building. But I find it very hard to identify the best candidate from all the quoted builders. Hence the main reason for thinking about a small buy of a brick maker. Simply because they all buy bricks.

I hold no other similar company, the closest being Morgan Sindall who have the Lovell business. But it's not really into speculative house building and certainly doesn't make bricks.

If it's just bricks you want to focus on I think Fortera are the larger producer. Ibstock has more a blended range of products including precast concrete for rail and new homes. I think Fortera are ahead in the race to "modernise" brick production facilities. I wouldn't get too hung up on a dividend cut unless you rely on dividend income. Fortera carry significantly less debt from what I've just looked at (obviously check that comment ).

Fortera's margins look slightly less than Ibstock and I wonder if that suggests with new efficiencies coming into play they can perhaps increase their share of the brick market in the UK? Have a look at Fortera's new Desford factory which will give you some idea as to how well placed Fortera are in the market of brick production. Ibstock are building a new facility at the moment albeit will produce slightly less than Fortera's Desford.

Do pop some information up on Ibstock if you look in detail though ... I'd be interested.

Thank you

AiY(D)

[BullDog]

I can't recall why I opted for Forterra.

Some information here from 11th April 2023.

AiY(D)

Thanks. Your comments are timely since I have been thinking of buying a small stake in one or the other brick maker. Of the two I have tended to favour Ibstock. From my very amateur findings it looks to me like Forterra is at greater risk of a dividend cut. It looks to me like Ibstock is more likely to maintain dividend and perhaps start to grow them beyond the short to medium term.

I have been looking for a cyclical opportunity in house building. But I find it very hard to identify the best candidate from all the quoted builders. Hence the main reason for thinking about a small buy of a brick maker. Simply because they all buy bricks.

I hold no other similar company, the closest being Morgan Sindall who have the Lovell business. But it's not really into speculative house building and certainly doesn't make bricks.

If it's just bricks you want to focus on I think Fortera are the larger producer. Ibstock has more a blended range of products including precast concrete for rail and new homes. I think Fortera are ahead in the race to "modernise" brick production facilities. I wouldn't get too hung up on a dividend cut unless you rely on dividend income. Fortera carry significantly less debt from what I've just looked at (obviously check that comment ).

Fortera's margins look slightly less than Ibstock and I wonder if that suggests with new efficiencies coming into play they can perhaps increase their share of the brick market in the UK? Have a look at Fortera's new Desford factory which will give you some idea as to how well placed Fortera are in the market of brick production. Ibstock are building a new facility at the moment albeit will produce slightly less than Fortera's Desford.

Do pop some information up on Ibstock if you look in detail though ... I'd be interested.

Thank you

AiY(D)

Thanks that's all very interesting including the updating of manufacting facilities that's happening. I haven't gone beyond looking at the numbers on HL's website at the moment. Looking at PE, yield, dividend cover (don't want to buy a cutter) year low/highs, I know HL aren't 100% reliable for numbers but as a lay person I'm not sure I can add anything by looking anywhere else. Hence my interest in what others think of opportunity/lack of opportunity in the industry. It's obviously highly cyclical and calling the bottom is never easy.

[AsleepInYorkshire]

If it's just bricks you want to focus on I think Fortera are the larger producer. Ibstock has more a blended range of products including precast concrete for rail and new homes. I think Fortera are ahead in the race to "modernise" brick production facilities. I wouldn't get too hung up on a dividend cut unless you rely on dividend income. Fortera carry significantly less debt from what I've just looked at (obviously check that comment ).

Fortera's margins look slightly less than Ibstock and I wonder if that suggests with new efficiencies coming into play they can perhaps increase their share of the brick market in the UK? Have a look at Fortera's new Desford factory which will give you some idea as to how well placed Fortera are in the market of brick production. Ibstock are building a new facility at the moment albeit will produce slightly less than Fortera's Desford.

Do pop some information up on Ibstock if you look in detail though ... I'd be interested.

Thank you

AiY(D)

Thanks that's all very interesting including the updating of manufacting facilities that's happening. I haven't gone beyond looking at the numbers on HL's website at the moment. Looking at PE, yield, dividend cover (don't want to buy a cutter) year low/highs, I know HL aren't 100% reliable for numbers but as a lay person I'm not sure I can add anything by looking anywhere else. Hence my interest in what others think of opportunity/lack of opportunity in the industry. It's obviously highly cyclical and calling the bottom is never easy.

I'm not trying to call the bottom. Just buying the stock downwards to average my overall buy cost. My focus on Fortera was due to Brexit. We were importing about 42% (Fortera claim 40%) of the UK's demand for bricks from europe. Brexit cut that supply off. In addition Grenfell has seen many specifiers going to brick slips instead of cladding. Fortera claim it would take a new entrant to the market about 10 years to open up a manufacturing plant next to a substantive clay source. All that's needed now is some recovery in the market place and Fortera should do well. I'd also point out that they purchased £40m of their own shares in year ending 2022. I'm not a fan of share buybacks but I assumed it was cash they'd generated that they couldn't allocate anywhere else because of macro economic constraints and uncertainty.

I hasten to add this isn't going to come good overnight. I think there's at least a couple of years before our economy starts to turn some sort of positive corner and when it does I'm not entirely sure where it will go as I've only ever known our economy when it's been in the EU.

AiY(D)

[AsleepInYorkshire]

Bellway to cut volume by a third as firm axes around 150 staff

Housebuilder says it expects to build just 7,500 homes this year and has let go of around 5% of staff

Housebuilder Bellway has said it is expecting to cut build volume by a third and see a near halving of profit in its current financial year, given weak demand for new homes prompted by high interest rates.

The listed builder, reporting results for the full year to July, said it expected completions to drop to around 7,500 in the current year, from 10,945 in the year just gone, and for its profit margin to drop by at least six percentage points.

AiY(D)

[BullDog]

Bellway to cut volume by a third as firm axes around 150 staff

Housebuilder says it expects to build just 7,500 homes this year and has let go of around 5% of staff

Housebuilder Bellway has said it is expecting to cut build volume by a third and see a near halving of profit in its current financial year, given weak demand for new homes prompted by high interest rates.

The listed builder, reporting results for the full year to July, said it expected completions to drop to around 7,500 in the current year, from 10,945 in the year just gone, and for its profit margin to drop by at least six percentage points.

AiY(D)

And the shares go up. I am never going to understand this stock market stuff. Obviously.

[AsleepInYorkshire]

Bellway to cut volume by a third as firm axes around 150 staff

Housebuilder says it expects to build just 7,500 homes this year and has let go of around 5% of staff

Housebuilder Bellway has said it is expecting to cut build volume by a third and see a near halving of profit in its current financial year, given weak demand for new homes prompted by high interest rates.

The listed builder, reporting results for the full year to July, said it expected completions to drop to around 7,500 in the current year, from 10,945 in the year just gone, and for its profit margin to drop by at least six percentage points.

AiY(D)

And the shares go up. I am never going to understand this stock market stuff. Obviously.

Check the book value of the company

AiY(D)