What does Taylor Wimpey CEO Pete Redfern know that the rest of the embattled housebuilding sector doesn’t? The UK’s second-biggest developer is back in the land market. Could it have had the heads-up that Boris is about to call in the cavalry?
In last Friday’s update, the £5bn market cap group said that most of its sites and showrooms were open and all furloughed employees had returned. It added that it was “beginning to see increased [land] opportunities on favourable terms” and had already contracted on a small number of early purchases. “Given the current backdrop, we expect the number to grow over the coming months,” it continued.
TW and pretty much everyone else had kiboshed all discretionary land expenditure amid a scramble to conserve funds within days of the PM announcing the lockdown on 23 March.
The preoccupation has been with increasing building volumes, but times have changed
This might just be the CEO Pete Redfern signalling to shareholders his aim of getting out of the traps ahead of competitors. He may be suggesting to landowners or mid-sized housebuilders looking to offload sites that TW should be their first port of call. Or, as a director of one of its suppliers suggested, “they are expecting more government help on housebuilding”.
Redfern, like his counterpart David Thomas at Barratt, the number one by volume, maintains a regular conversation with No. 10.
Pushing up housebuilding volumes was one of the aims of Boris Johnson’s manifesto. So it was no surprise when housing secretary Robert Jenrick announced on 12 May that estate agents could return to their offices while most of the rest of the high street was deemed ‘non-essential’. More tellingly, weeks earlier he was egging on housebuilders to return to sites in the middle of the lockdown.
So, could a big announcement be on the cards? If so, I believe it could include an extension and possibly expansion of the Help-to-Buy scheme, which has part-funded more than a quarter of a million new homes since 2013 – not without well-aired controversy.
The scheme has provided £15bn in ‘equity loans’ – up to 20% of the price of a newly built home, or 40% in London, eventually to be repaid in proportion to any subsequent rise and fall in the value of the property. On 3 June, the government quietly announced payment holidays on current or upcoming equity loan instalments if owners face financial difficulty because of the pandemic.
The first Help-to-Buy scheme is scheduled to end in March 2021 and will be replaced from then until 2023 with a more restrictive scheme, aimed at first-time buyers only and with lower regional price caps replacing the national £600,000 limit. I’m told it’s an “absolute racing certainty” that both the transition date and end date will be moved. One caveat, however – the Treasury is said to be putting up stout resistance.
My assumption is that there could also be a range of measures to kick-start any stalled developments or to get landowners to start building on their sites – if they’ve not been persuaded to sell them to TW. For example, soft loans to developers to fund infrastructure and work in progress; or measures to speed up or bypass some of the minutiae of planning; or easier visa conditions for EU construction workers after free movement ends.
Another potential weapon in the government’s arsenal is stamp duty reform. I’ve been sceptical about the rumours that surface ahead of most Budgets suggesting sweeping cuts. First-time buyers have been helped, but that’s it. Otherwise, the government would be lambasted as ‘funding its rich mates’. The preoccupation, moreover, has been on increasing building volumes.
However, times have changed. Some movement in at least the middle house-price bands could have a major impact. This would not be to help owners of secondhand homes per se, but to improve liquidity in the wider market – possibly the sub-text for the opening of estate agents. Given the billions being hosed around, people would hardly notice, surely?
A ‘flattening of the curve’ on stamp duty bands, along with a ‘Marshall Plan’ for housebuilding, would be a much-needed fillip for the economy, employment and probably votes. Who could have seen that coming?
Alastair Stewart is an equities analyst and consultant