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Housebuilders Fall As Credit Suisse Finds Them Fully Valued

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London property prices are booming and look set to keep rising but Credit Suisse doesn’t think the benefits will filter down to Britain’s house-builders. The bank today downgraded all four of its previous Buy recommendations Barratt Developments, Bellway, Persimmon and Taylor Wimpey saying it thinks shares are as high as they’re going to get. “Underlying conditions in the UK market are clearly very strong now, but at current valuations we suggest the equity market is already pricing the ‘best of all possible worlds’,” analysts said in the note. The bank added: “To be very clear, we are not calling the top of the actual UK housing cycle, but we are calling the top of the equity cycle.”

What is the difference between the top of housing cycle and the top of the equity cycle?

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What is the difference between the top of housing cycle and the top of the equity cycle?

They're saying that the current share price fully reflects prospective earnings and margins.

So even though house prices and volumes may continue to rise i.e. the housing cycle, they're saying they don't think housebuilders share prices are likely to rise further.

It may be that costs will rise due to increasing staffing levels/wages, contractor wages, margins on land banks/new sites may become tighter, materials costs may be under pressure due to demand and so on.

Credit Suisse seem to have been towards the top end of equity price targets, which have now been met, so future earnings are probably going to have to meet expectations to justify current share prices.

Or something like that............

BDEV (for instance) are up something like 700% last 5 years

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They're saying that the current share price fully reflects prospective earnings and margins.

So even though house prices and volumes may continue to rise i.e. the housing cycle, they're saying they don't think housebuilders share prices are likely to rise further.

It may be that costs will rise due to increasing staffing levels/wages, contractor wages, margins on land banks/new sites may become tighter, materials costs may be under pressure due to demand and so on.

Credit Suisse seem to have been towards the top end of equity price targets, which have now been met, so future earnings are probably going to have to meet expectations to justify current share prices.

Or something like that............

BDEV (for instance) are up something like 700% last 5 years

Pretty good indicator on the way up and on the way down..

builderscorjul09.jpg

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Pretty good indicator on the way up and on the way down..

Agree. Although you'd expect that in the bubble phase and the crash phase I think (i.e. your chart).

BDEV up 30% YTD which might suggest very strong housing activity next coulpe of months according to your chart.

CS seem to be saying it's fully priced. Doesn't necc. mean it'll fall significantly, though I suspect there's more zig and zag ahead and the election/expiry of HTB must leave a big question mark what happens in 2015.

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They're saying that the current share price fully reflects prospective earnings and margins.

So even though house prices and volumes may continue to rise i.e. the housing cycle, they're saying they don't think housebuilders share prices are likely to rise further.

It may be that costs will rise due to increasing staffing levels/wages, contractor wages, margins on land banks/new sites may become tighter, materials costs may be under pressure due to demand and so on.

Credit Suisse seem to have been towards the top end of equity price targets, which have now been met, so future earnings are probably going to have to meet expectations to justify current share prices.

Or something like that............

BDEV (for instance) are up something like 700% last 5 years

:blink:

Was the alternative that we were paying over the money for Persimmon because we thought that their earnings were going to exceed our expectations of their future earnings? (If it sounds like a paradox and looks like a bubble, and there's an analyst calling a top, I say that it is last call for any greater fool waiting in the wings and wanting to go long dead parrot).

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Housing related shares seem to be struggling.

BDEV March 4th 452 Today 342 (-25%)

TW Feb 24th 131 Today 105 (-20%)

RMV FEB 14th 2777 Today 2137 (-20%)

and so on...

Discuss...

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Pretty good indicator on the way up and on the way down..

builderscorjul09.jpg

Anyone got an updated graph? Sorry for being lazy.... :)

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Housing related shares seem to be struggling.

BDEV March 4th 452 Today 342 (-25%)

TW Feb 24th 131 Today 105 (-20%)

RMV FEB 14th 2777 Today 2137 (-20%)

and so on...

Discuss...

Part of the wider theme that ends in a large popping sound, then wailing and moaning about "victims" ?

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Housing related shares seem to be struggling.

BDEV March 4th 452 Today 342 (-25%)

TW Feb 24th 131 Today 105 (-20%)

RMV FEB 14th 2777 Today 2137 (-20%)

and so on...

Discuss...

??

Earlier this week they were reported to be leading the FTSE to a new high...

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??

Earlier this week they were reported to be leading the FTSE to a new high...

Yes they did, for that ONE day. They were before, and have been since, falling like a sack of Portland's finest.

Selective reporting at its finest.

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Yes they did, for that ONE day. They were before, and have been since, falling like a sack of Portland's finest.

Selective reporting propaganda at its finest.

Just had a look at the 3 year chart for barrats. It's definite peak ( Feb 2014 ) and down since then.

Down almost 6% today.

Someone knows something we don't.

Edited by TheCountOfNowhere

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Agree. Although you'd expect that in the bubble phase and the crash phase I think (i.e. your chart).

BDEV up 30% YTD which might suggest very strong housing activity next coulpe of months according to your chart.

CS seem to be saying it's fully priced. Doesn't necc. mean it'll fall significantly, though I suspect there's more zig and zag ahead and the election/expiry of HTB must leave a big question mark what happens in 2015.

http://in.reuters.com/article/2015/02/25/barratt-dev-results-idINASM00098I20150225

Barratt Developments posts 75 pct rise in first-half profit

Feb 25 (Reuters) - Housebuilder Barratt Developments posted a 75 percent rise in profit in the six months to end-December on Wednesday after it completed 6,971 new homes, and said its second half had started well.

The company, which reported pretax profit of 210.2 million pounds ($325.62 million) for the period, said it planned to open a further 90 sites in the second half, which would deliver another 13,500 new homes over their lifetime

.

http://stockcharts.com/h-sc/ui?s=BDEV.L&p=D&yr=2&mn=0&dy=0&id=p86817884827

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Bully for Credit Suisse, personally I'll be hanging on to Persimmon for a year or two yet.

Its a bump of thread from 12 months ago SS, in light of BDEV results and price developments since.

Sorry if original headline appears misleading.

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Its a bump of thread from 12 months ago SS, in light of BDEV results and price developments since.

Sorry if original headline appears misleading.

Thanks for the clarification. I'm astonished that twelve months ago any broker would consider house builders fully valued, they were a screaming buy then and are still pretty attractive now.

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