Help to Buy has created a golden age for Britain's house builders

Galliford Try on Wednesday announced a set of record-breaking results, becoming the latest house-builder to post big rises in profit and revenue.

Revenue is up 31% to £2.4 billion ($US3.6 billion), while profit before tax jumped 20% to £114 million ($US174.8 million). The dividend is being hiked by 21%.

These increases aren’t unusual — Barratt Developments revealed a 44% jump in profit last week, while fellow house builder Redrow had a crazy 53% jump.

All three have the government to thank.

There aren’t enough houses to go around in the UK, which naturally pushes up prices. But the government’s Help to Buy scheme, which lets first time buyers get a mortgage with a deposit of just 5%, has added even more demand to the market by adding in a chunk of buyers who wouldn’t normally be able to afford it.

That’s adding more pressure and juicing prices even more — the Royal Institute of Chartered Surveyors is predicting a 6% rise in house prices this year, while inflation is running at 0.5% and wage rises around 3%.

All of this has created the perfect conditions for house builders, who are making big profits off whatever they build. Galliford Try only built about 2% more homes compared to last year, but revenue from them rose 11%.

Galliford Try acknowledges how important the government’s role in the house market right now when it talks about the assumptions in its strategy up to 2018 (emphasis ours):

Those assumptions were no material early tightening of the private housing market, with mortgage availability and flexibility continuing to grow. More broadly, the plan assumed continuation of [sic] Central Government support for the supply of affordable housing including support for first-time buyers and a steady recovery in the wider construction market. We also assumed a tougher building environment in the early years, stabilising towards the end of the period.

In fact, the only thing holding housebuilders back at the moment is they can’t build homes fast enough. Because building houses is like printing money right now all house builders are piling in to build new properties.

That means there’s a shortage of skilled labourers, like electricians, to fit out properties. Here’s Galliford Try (emphasis ours):

In Housebuilding, the UK’s supply of new homes continues to fall significantly short of demand, underpinning the growth aspirations of both Linden Homes and Galliford Try Partnerships. The outlook for Linden Homes remains strong, with the mortgage and land markets and the planning environment all positive. The main issue is building to schedule, given the shortage of skilled people.

Redrow and Barratt had similar complaints. But really these are minor quibbles given the profit and revenue rises these guys are posting. In reality, Help to Buy has helped create a golden age for house builders.

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