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How Bad Is It For Housebuilders?

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http://ftalphaville.ft.com/blog/2008/07/07...hammered-again/

Housebuilders hammered (again)

Taylor Wimpey’s results last week bode ill for housebuilders. Quite apart from anything else, they have given analysts a benchmark against which to calibrate the outlook for the entire sector.

Merrill Lynch set the ball rolling on Monday with deep cuts in price targets across the board, and a bearish anticipation of multiple writedowns and rights issues.

All predicated on a grim macro outlook:

We would reiterate that our underlying macro assumption behind our forecasts is for UK house prices to fall by up to 17% between 2008-09

1550.jpg

As the ML analysts note, if the 1990s are anything of a experience to be repeated, then the industry will need to revisit land values on a regular basis, taking periodic writedowns over the course of the next two years.

Taylor Wimpey’s 15 per cent (equivalent) writedown on land and WIP is looking like the firts of many. Even the most “robust” players - Bellway, Bovic, Persimmon and Redrow - are facing a total writedown more than twice that, at 30 per cent to land and WIP, according to ML.

Joining TW in the “distressed” corner is, of course, Barratt (trading statement due this Thursday). Analysts have a 27 pence price target on BDEV - reflecting the likelihood of a capital raising effort at a 50 per cent discount to the current share price.

A panorama of the writedown landscape:

1552.jpg

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When all the brokers say "sell" it must be time to buy. I expect these are the same idiots who were issuing "Buy" recommendations two years ago and raising all their forecasts.

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When all the brokers say "sell" it must be time to buy. I expect these are the same idiots who were issuing "Buy" recommendations two years ago and raising all their forecasts.

In this particular case, "Underperform" means bankrupt :ph34r:

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TW current shareprice 35p. Target shareprice 35p.

Do these retards actaully get PAID for such heedy advice?

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When all the brokers say "sell" it must be time to buy. I expect these are the same idiots who were issuing "Buy" recommendations two years ago and raising all their forecasts.

The only way I can see some of them surviving in the next few years will be to merger. Would this equate to realising some value in their shares? ie. price may rise on speculation?

As it is at the moment, I think a few of them still have some way to fall..............

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TW current shareprice 35p. Target shareprice 35p.

Do these retards actaully get PAID for such heedy advice?

TW took a tumble just after 3 o'clock. Now sub 28p having been 30.5 most of the day.

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TW current shareprice 35p. Target shareprice 35p.

Do these retards actaully get PAID for such heedy advice?

They just make it up as they go along ........

TW going straight down the sh1tter .........

Last Trade: 26.75 p Trade Time: 3:36PM

Change: 5.00 (15.75%)

Prev Close: 31.75

Open: 33.00

Bid: 27.25

Ask: 26.50

1y Target Est: 72.16p

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They are creatures of the banks now. When they could generate an annual profit and could show assets well above their borrowing, they were worth something. Now, like a house buyer in negative equity who has just lost his job, they live from day to day at the banker's discretion.

Edited by insidetrack

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They have fallen so much that it's impossible to say what their real value is, or should be. What should TW be? 20p? 30p? 40p? There is a 100% difference between 20p and 40p. The brokers have no idea of what price they should be and neither do I. All I know is that sentiment is just about at rock bottom, and if you look back historically when that has happened, it has proven to overpessimistic, meaning the shares are underpriced and represent good value.

The flipside of unsustainable optimism is unjustified pessimism.

As I keep saying, it's impossible to say when the bottom is in - nobody can predict that. It is almost inevitable that they will carry on falling simply due to momentum. All I can say is that sentiment is horrific, which usually means that they are undervalued, so I plan to scoop up as many of them as I see fit while it remains like this.

Edited by Van

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No one in their right mind would move or buy a house in these conditions.

What are the chances of handing a deposit over to a UK new home builder, them going bust and you losing your deposit - a bit like all those sofa companies that go bust every recession owing sofas to people?

Could be fun gazundering a few of them though ;)

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One of my mates works for a building company that employ 30 folk, usually they get a least half a dozen calls for quotes on work daily (their work is 30% new builds 70% private).

They've had no calls for two weeks, letters have just gone out to all employees warning of forthcoming redundancies.

This is a south east firm, according to him he building trade is buggered he has started looking elsewhere though so far every company he's tried are in the same boat.

Edited by Live_in_hope

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When all the brokers say "sell" it must be time to buy. I expect these are the same idiots who were issuing "Buy" recommendations two years ago and raising all their forecasts.

And telling their cliets to buy dot-com shares in 1999....

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No one in their right mind would move or buy a house in these conditions.

this has little to do with people suddenly getting smart about how much to pay for a home. this has everything to do with these prices utterly impossible now that the funding has dried up.

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Does anyone know how big Crest Nicholson are? They specialise in redeveloping urban sites. I've not seen any reductions for flats at Poole Quarter in Poole which I find surprising given the oversupply of flats in the area.

On a side note I noticed that they are a 50:50 joint venture between HBOS and West Coast Capital.

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They have fallen so much that it's impossible to say what their real value is, or should be. What should TW be? 20p? 30p? 40p? There is a 100% difference between 20p and 40p. The brokers have no idea of what price they should be and neither do I. All I know is that sentiment is just about at rock bottom, and if you look back historically when that has happened, it has proven to overpessimistic, meaning the shares are underpriced and represent good value.

The flipside of unsustainable optimism is unjustified pessimism.

As I keep saying, it's impossible to say when the bottom is in - nobody can predict that. It is almost inevitable that they will carry on falling simply due to momentum. All I can say is that sentiment is horrific, which usually means that they are undervalued, so I plan to scoop up as many of them as I see fit while it remains like this.

In the last crash, only 3 of the top 20 builders survived.

This time is worse imo.

Even if the share price is 90% undervalued and you bought 10 different builder stocks. You are likely to see 9 go bankrupt and the one survive, so that one alone must rise 1000% to cover the 9 that went poo.

Now, I would say if you want to bet cash on builder stocks, I would say don’t buy any with lots of debt (ie barratts/ Taylor)

All that said , builders are one of the most risky group to invests in because 90% of their “assets” is the perceived value in their “land bank”.

One simple law making planning lax would wipe 80% if not more off the value of builder shares even in a boom.

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In the last crash, only 3 of the top 20 builders survived.

This time is worse imo.

Even if the share price is 90% undervalued and you bought 10 different builder stocks. You are likely to see 9 go bankrupt and the one survive, so that one alone must rise 1000% to cover the 9 that went poo.

Now, I would say if you want to bet cash on builder stocks, I would say don’t buy any with lots of debt (ie barratts/ Taylor)

All that said , builders are one of the most risky group to invests in because 90% of their “assets” is the perceived value in their “land bank”.

One simple law making planning lax would wipe 80% if not more off the value of builder shares even in a boom.

Hadnt thought of it like that, my thought was that they would become so diluted once banks or some SWF bails them out.

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problem with barratt and TW is their recent acquisitions.

primary motivation was to increase their land banks. normally, landbanks would be acquired over many years in a rising market, so average purchase price not too high.

the takeovers involved purchase of substantial landbanks at top dollar, with borrowed money.

muppets, heading for the bonfire.

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problem with barratt and TW is their recent acquisitions.

No, the problem isn’t that. The problem is that they work in an ultra corrupt industry with VI laws that make it a “good idea” to buy land as land with planning permission is worth a lot of money.

Hence these “businesses” build up 10-year supplies of the land they need? Why? Know any other business, which is lean and efficient and profitable, that holds 10 years of stock?

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Hadnt thought of it like that, my thought was that they would become so diluted once banks or some SWF bails them out.

I can't see even SWF's rushing in to prop them up, SWF's aren't so stoopid to fall for the pent up demand, massive immigration spin.

Why not hold off till GBP has a real world value then houses(well land banks) bought with those currencies will get way more bang per buck.

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No one in their right mind would move or buy a house in these conditions.

A woman in our office is trying to sell her 2 bed terrace. She has had no luck over the last 7 months and has reduced it

by 15K (about 10%). Meanwhile the office no it all can't understand why it won't sell "because there must be first time buyers

out there"

I keep my mouth tightly shut during such conversations as they all so interested in seeing the market go up and up taking their

perceived baby boomer money up higher and higher. There is no reasoning with such fools who incedently read the daily mail.

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One of my mates works for a building company that employ 30 folk, usually they get a least half a dozen calls for quotes on work daily (their work is 30% new builds 70% private).

They've had no calls for two weeks, letters have just gone out to all employees warning of forthcoming redundancies.

This is a south east firm, according to him he building trade is buggered he has started looking elsewhere though so far every company he's tried are in the same boat.

Would he go into other kind of work, the building trade is over for the next 5/10 years.

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Would he go into other kind of work, the building trade is over for the next 5/10 years.

Difficult one he's spent 20 years in the building trade (from 18)

I guess it largely depends on what the masses of eastern europeans do.

Though I've another mate who's a builder (works for himself) in Borehamwood and is having to turn down work - he spent ten years getting himself a good name.

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  • 396 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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