Building your house on government support does not provide the firmest of foundations

Marc Sidwell
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BETWEEN a government practically falling over itself to offer support and the supply constraints that continue to dog the UK property sector, there are worse things to be, even in today’s difficult marketplace, than a housebuilder. As Bovis Homes proved yesterday, with a doubling of pre-tax profit in the first half of the year compared to the same period in 2011.

Still, Bovis showed the limits of what government help can achieve, with chief executive David Ritchie blowing extremely cool on the idea that loosening the requirements for affordable housing would provide much of a short-term fix, given that in a depressed market finding extra private buyers with the requisite mortgage approval remains the problem, not a solution. The group is, however, already benefiting from the other schemes on offer. It “expects NewBuy to provide further support to the new homes market”, and is already gaining three or four NewBuy reservations a week. It also expects to use its FirstBuy allocation in the third quarter.

Boosting the proportion of first time buyers risks skewing properties to the cheaper end of the market, but Bovis seems to be overcoming that by proving location, location, location remains the property watchword. By selectively selling some plots of land from its extensive stock and acquiring others, it is shifting towards having two thirds of its business focused in the south, with the higher prices that region can command. At the start of the year, the builder had 59 per cent of its sites in the south. It had grown that to 65 per cent by the end of the half year. Moving to a two-thirds southern focus should help average sales price even without material improvements in the market.

But the biggest challenge for Bovis may be staying ahead of the pack. When government reaches out the taxpayer’s hand to help a whole sector, an individual firm can’t rely on that aid to differentiate itself to investors. The real test for these results will be in how investors weigh Bovis’s performance against its rivals.