The cloud of pessimism that seems to have hung over the building sector and the housing market in general over the last few years is starting to be blown away, setting the private housebuilders on a more positive course for 2013 mainly as a result of the FirstBuy scheme introduced by the Government.
Gleeson results highlight the recovery taking place
Housebuilder MJ Gleeson is enjoying a much needed upturn in fortunes and recently reported a 53% increase in sales of homes to private buyers. During the six months up to the end of December they sold 164 homes, which is a steep improvement on the 107 they sold in the same comparable period last year. Housing associations are also helping to fuel demand and as a result Gleeson reported a rise in sales values of 65% generating a turnover of £33.2M in the period.
There is little doubt that the company highlights the boost that is being generated by the introduction of the Government’s FirstBuy scheme which is aimed at providing support to first time buyers by providing a 20% equity loan as a way of allowing consumers who do not have a sufficient deposit to gain a foothold on the housing ladder.
The scheme has proved to be very popular with first time buyers and Gleeson has recently announced that it has recently secured an additional allocation of £2M which will allow them to help another 170 first time buyers to secure their first home.
Demand expected to remain strong
Gleeson is a good example of how the sector intends to move forward and meet this growing demand which should also help to boost the levels of confidence in the sector at the same time. The company has a land buying arm which buys with a view to re-selling once the appropriate planning permissions for development have been obtained. They are meeting a strong demand from major housebuilders in the South of England who require suitable residential sites.
Government cash to help the recovery
The FirstBuy scheme is expected to introduce an extra 16,500 buyers into the housing market who would not have previously been able to consider buying their own home and the shared ownership scheme will be funded by a cash injection of £280M from the government. The housebuilder will share the initial risk with the government as they are effectively holding a 20% equity stake in the property but when the property is sold they will get their percentage of the sale proceed repaid and benefit from any upturn in the subsequent value of their percentage holding.
Whilst the FirstBuy scheme is not the cure for all the ailments that the housing market has been suffering from over the last few years, the financial results that MJ Gleeson have produced do at least demonstrate that there is a road to recovery being laid out and the scheme will almost certainly help to stimulate a greater level of confidence in the sector overall.
Once a level of confidence returns to the housing market then it is widely expected that housebuilders such as Gleeson will be able to report even stronger results in the future.