Don’t let builders be the only beneficiaries

Housebuilding companies have rallied since news in last week’s budget that £250m would be made available to help first time buyers get onto the property ladder.

Dubbed Firstbuy Direct, the scheme will give those below a certain income threshold access to a 25 per cent equity loan to cover the deposit on a new home. Under the system, taxpayers will fund 10 per cent, the house builder will put up another 10 per cent and the house buyer will put in the further 5 per cent.

Though it may seem a very benevolent move from the state, the major party to benefit will be house builders, and in turn the investors taking a position on the future of the UK housebuilding sector.

According to Spread Co analyst Ian O’Sullivan, “it does seem that one of the clear winners in this move by the Chancellor to assist first time buyers are the builders. It is designed supposedly to help first time buyers to get on the property market, but rather than address the issue of high house prices, they are using taxpayers’ money to run a scheme that helps to keep house prices high by assisting more people to pay the current high prices for houses. The builders of course are pleased as this applies to new homes – meaning more sales of new homes for UK building companies. As for existing home sales, this might force them to fall a little further in price to try to compete with the new homes because of this.”

So how to take advantage of this move? The straightforward approach is to take a CFD position on listed UK builders, such as Bellway, Barratt and Redrow (which have risen 5.5 per cent, 10 per cent and 12 per cent respectively since the budget). Alternatively, you could take a view on the sector as a whole. IG Markets is one of the CFD providers that quotes the FTSE 350 household and home construction index, which is trading near to a first quarter high after a post-budget rally. Another spread, also offered by IG, is the housing price index which gives you the chance to take a direct view on the direction the housing market is heading.

Whether you think the rally on the back of the budget is a short lived one, or the start of a more broad uptrend, there are a range of options out there to allow you to benefit, even if first time buyers don’t.