Banker belt boom outside London will be a boon to Bovis Homes – Bottom Line

Six weeks ago I wrote on these pages that I thought there was “scope for housebuilders to continue their bull run”. Bovis Homes is thus well and truly in my good books. Yesterday’s strong set of results boosted its share price, which is now 7.5 per cent higher than when I penned my last bullish verdict on the sector at the start of July. Not bad.

 

Smugness aside, a cursory glance at the share prices of Bovis and its peers reveals why people who actually invest real money might be more reticent than people who simply write for newspapers. Much of the stock has risen in recent weeks (including that of Persimmon, which reports today) yet over time there are lots of downs as well as a lot of ups, betraying a degree of volatility.

 

Many risks loom over the housing market, of course. Regulations such as the mortgage market review that knocked shares earlier in the year; new lending restrictions being imposed by the Bank of England; the fear of a price bubble; an unreformed planning regime; rising interest rates; the possibility of Help to Buy being scrapped. Et cetera. No wonder the sector trades at such a relatively low price-to-earnings ratio. 

 

Yet Bovis shows that for bold investors, there is value to be had. A wave of recent data has revealed that London’s housing market – which does not affect Bovis – is stuttering, while prices and transactions in the banker belt and elsewhere in the south are pushing on nicely.

 

Many analysts expect this to remain the case. If so, it will provide a huge boost to Bovis, which is swiftly delivering houses in salubrious areas of the south outside London. This is a success that can still be built upon.