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Kentio, I was referring to the forward annual dividend rate which is 13p from what I can see, or 10%. The trailing annual dividend rate is as you say is 9p or 7%. Please correct me, if I'm wrong.
Hi bighammer
Spot on with your thoughts, this recession feels different!
Now wether it’s the mentality of the new generation (not afraid of debt) for me and probably you the size of some of these mortgages are eye watering and I probably wouldn’t be able to sleep.
Like you say in the East Midlands it’s mental!
Good luck all and long may it continue
Wigan Warriers, i just feel the builders are pushing far more than they have in the 40years i have been a chippy so as to fill the coffers to avoid anything like that of 2007/8.
6 days a week is now expected to try and keep up with demand due to late arrivals of materials and shortage of workforce.
In September last year the price was 1.80 its recently hit £1.20 so 30% down from highs. Has some of the recession been costed in already??? The price is tempting today
dim123 How. to. you arrive. at a 10%. dividend? They pay 4.44 p. this month and. will pay the. same in November - total 8.88 p - Divide. by the. share price. - 128 - and the. dividend is 6.9%
I feel there's some recency bias when it come to the type of recession we'll face, especially in the media. I see a lot of articles on a housing crash, etc. just because that's what caused the last recession (excluding Covid). I think that's very unlikely. IMO the next recession will be caused by the central banks tightening, trying to stop supply side inflation by limiting demand through higher rates.
The housing market is obviously very local and varies a lot from country to country. But nowadays most people are on long term mortgages, especially in the EU and the USA where they have 30 year fixed mortgages. The UK, AU and NZ have max 10 year fixed I think so a bit more exposed. However, I know my affordability was tested for 5% interest when I got my mortgage recently. So there are a lot of safeguards in place in the system after 2008.
So I do expect obviously a negative impact for HBs during a recession but it won't by anything as bad as 14 year ago. On that note TW has a super strong balance sheet and no debt. The biggest negative impact I can see here is a cut in the dividend. It's already at 10% so if the share price drops let's say another 20% during a recession and they're making less money they might cut it. It will still be a high dividend but on that new lower price. And obviously due to the cut the share price will fall even further. It'd be good to have some dry powder to take advantage of that if it happens.
@Bighammer. To be honest this is what usually happens, as banks want to maximise the profitability of their mortgage book if interest rates start to rise. There are people who have stretched to buy a new house, and some will probably not complete if their bank withdraws their offer or re quotes at a higher rate. Some will just accept the new (more expensive) offer and continue. However, given the builders have full order books any cancellations will be very quickly re sold.
BoE are forecasting a return to substantially below their target of 2% inflation rates in 3 yrs, with a peak of around 2% interest rates by the end of this year (currently 1%). Currently, around 80% of all mortgages are fixed, either 2 or 5 yrs, so no real drama for those. Also, the percentage of new homes being bought with cash is increasing as COVID seems to have loosened the pockets of many better off people to either move or help their offspring with cash gifts.
I am not suggesting that all is rosy in the world at the moment and there will be some people who wanted to move to new build who will be disappointed , however the order book will absorb any cancellations without a problem.
Finally, in all the years of monitoring the house builders I would say that all media and analyst commentary always underestimate the ambition of Brits to spend their money on homes. As long as the builders don't flood the market, and that's unlikely given supply chain and skill tightness, then I suspect Wimps and others will sail through the next couple of years without too much in the way of drama.
More interesting is whether the market decides to rerate the builders, or whether they will still trade at historically low valuations. I believe that the biggest impact on the SP will be a change of sentiment, rather than any tightening of interest rates for a year or two.
We will see :-)
Just my thinking out loud and having spoke to a few other main contractors, in the last recession most builders and suppliers got caught with their trousers down and as Ben said building stopped overnight , i feel this time builders are going flat out to get as many sales in as they can to get money in the bank as a just in case we go into recession . Building in the East Mids at the minute is absolutely mental with unrealistic build programmes for ALL builders , but if the banks keep lending then all well and good but i have heard from our sales team that some buyers are pushing to hit deadline day as the mortgage companies are either withdrawing their offer OR increasing the interest rate which the buyers simply cant afford.
With you on this Ben...
No sign of slowing on sites at the min... loads of sites with plenty of founds in so committed to build... National shortage still there (simply not enough labour, too many young people pushed to go to university and massive under investment from the successive labour/tory gov's...
Wife's in the morg. business and whilst they are seeing down valuations, the demand is still there and the feeling is a 3% correction in House prices next year! So nothing to write home about at the min... think we'll see a change after the summer (assuming Russia / Ukraine) is still an ongoing issue at that time...
Hi spurs
This is the question everyone in the game keeps asking, we are normally the first industry to get hit.
At the end of the last recession I remember them saying we were a million houses short and it hasn’t changed.
Now wether it’s the HB’s who took it in there own hands and controlled the amount of houses built per year, or the labour shortage helped, but it seems we are that magic number short still.
As it looks at the moment we are still going 100mph and when it slows I will let the board know!
Cheers
Ben
Congrats on the good returns, 4x in 10 years is nothing to scoff at! That's a market beating 15% annual return, which happens to be my target return.
Of course selling 6 months ago or 1 year ago would've been better but hindsight is always 20:20, as our cousins across the pond say!
Sold my holding here last week since holding from the recession a decade ago!
Richierich
Interested to hear you solution to the UK not being able to build 320k houses? Why do you think we cannot secure the labour or materials? Do you work in construction?
Ben Rumpson very interesting to see you have gone through the last 2 recessions whilst a working person. What do you predict will happen during this predicted downturn? Seems to me like there isn’t an actual fundamental reason for the incoming one? More of a supply/demand/inflation/recovery kinda mix up?
Hi Tophat
So if the funding from the banks and the government schemes carry on then the sales of houses will carry on.
That’s good news hopefully it will happen.
I’m good with that:)))
House builders have already said they can’t meet the 320,000 homes required to meet demand, due too materials and labour shortages.
The funding in schools and colleges over the last 5 years has been disgusting.
Vote Lib Dem’s or something, but heaven forbid we keep these Oxford privileged clowns, in power for another 4 years of austerity.
They’ve failed to build houses or even keep decent business in the U.K.
Eat out to Die out was another one of there bright ideas.
The deficit has also increased dramatically over the past 10 years of conservative government’s.
I’m not surprised considering the salaries.
Benrumpsen1
The “tap which was turned off” was the lending to the economy. During the financial crisis even the banks which didn’t need state aid were desperately short of capital and had to cut back lending to both people looking for mortgages and to companies like builders.
The regulatory changes since then have dramatically increased the bank’s capital and every year the largest lenders undergo a stress test to make sure that they can not only survive a severe recession but can continue to lend to the economy through it.
Last year’s stress test was far more severe than the financial crisis and at its worst all of the banks still had more capital, and of a higher quality, than they did in the “good years” prior to the financial crisis.
Hi All
I have been through the last two recessions, the one in the 90’s and the one in the 2006-10s and the first thing which happened then was house building more or less stopped!
This happened overnight, basically they spoke about recession and the next day the tap was turned off and house building stopped.
This one seems different, everyone is at 100mph and with no end in sight.
Now this could mean one of two things, we are either not in a recession yet or the plan is to build our way out of it!
Open to all suggestions and this is just my opinion.
All the best Ben