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Lejjb. I can see very little debt in the BDEV accounts for last year. Did they increase their loans since then? Am I missing something?
What debt obligations
What debt options?
My informal and unproven enquires also suggest that UK (vs other countries') housebuilders could face a situation worse than 2008, for the following (very different from 2008) reasons:
- rate hikes were faster than what heavily indebted (for good or bad reason) businesses could prepare for. And housebuilders rely a lot on credit as part of their land acquisitions.
- spiraling utility and food bills, together with increasing mortage rates, have made it harder for people to buy new houses.
There is a high risk that UK housebuilders will have to offload their assets at heavily discounted prices if they cannot sustainably match their increasing debt obligations. Combined with low demand for houses due to the inherent lack of affordability, Barratt is at a cliff's edge.
So, the underlying story here is that BDev appears to be taking a cautious approach to the market for the next few years. Also reducing costs, focusing on cash flow and buying back shares at bargain prices. For long investors this all looks like good news.
The situation now, is worse than the situation pre 2008 crash. We haven't even started yet. Debt levels are insane, the amount of leverage mind boggling.
Already the price here is back to what it was in 2004! Getting near a point when even the diehards are going to dump.
US foreclosures:
2008 - 1,332,991
2009 - 1,528,364
2010 - 1,654,634
First 6 months of 2022 - 164,581
It's nothing like 2008!!
hics: "It's worse than 2008."
The hell it is! Based on what metrics? Number of houses sold? Enquiries? Housebuilder profits? Numbers employed in the trades?
Either justify that statement or withdraw it!
extracover 46 is absolutely. right. The. house builders. have. NOT reduced the. numbers of houses they are. building. They are happy to. keep building up. "stock" as they know, an. so should. we (except for the. doom and gloom merchants) that. interest rates will fall next year (but WAGES. won't!) and there will be a renewed and increase. demand. for housing in the. UK. Our biggest enemy as shareholders - is the press. Lighten. up. everyone - the good times will come. again.
It's worse than 2008.
Appears to be based on one bank only Wells Fargo. Plus the 90% down is conveniently being compared to the figures around the time of the release from "lockdown" leading to the post Covid housing boom.
Media relies on selling doom and gloom and journos are notoriously lazy about checking stats and context.
Volume builders in UK are well set if there is a substantial fall-off in demand as their financial situations bear no comparison to 2008.
Sales always dry up this time of year, it's not a new phenomenon as folk start thinking about crimbo. Then come January the market gets going again - ask any estate agent.
Over in the states mortage applications down 90% and house buying conditions ranked as worst in history, UK likely see the same metrics soon.
My brothers a self employed bricky working on a barratts site, he’s just been layed off, they are putting roofs on the ones they have started then mothballing the site, a month back when I saw him he said there was a site meeting saying they didn’t have a single enquiry the week prior at the sites sales office. He’s now panicking about finding work. I remember back in 2008/2009 when I did new build electricity connections, work dried up and sites mothballed up and down the country, maybe history repeating itself or house builders being a bit more cautious preserving cash this time round.
hics, What are you "afraid" of - your own imagination perhaps? The latest reported "slim" margin was a before tax profit of 12% of sales; many businesses would love to have that kind of margin and "rising interest rates" are great when you have over a billion cash in your balance sheet as does Barrat.
Yes, we know you're suggesting a collapse. But the market isn't listening to you. Persimmon update tomorrow is anticipated and will be a great indicator so I'll read that.
this morning
Just looking at all the indicators for the market, looking at what's happening across the pond, looking at rates and mortgage applications. As I say, makes for grim reading.
Markets have these irrational bounces but I feel we are going way lower.
Can't agree with Hics. Extraordinarily negative! And the Share's bounced much higher immediately after. Poor timing, Hics!
Good points
The thing is hics, all that information is already in the public domaine and therefore factored into share prices. It's what happens from here that matters now. It may well be that the news gets worse, the war stretches on, inflation grows, interest rates rise etc. etc. but it might equally go the other way. There's an awful lot of bad news factored into housebuilder shares right now, but they're mainly in very good financial health, unlike in 2008 when they were mired in debt. And they survived that crisis. So, the contrarian view is to buy now, before any good news emerges. Buying low and selling high is, after all, the name of the game here, and what we're all trying to achieve.
Borrowing costs rising, impending recession, inflation still untamed and inflating raw material costs for builders with already slim margins on top of a labour force returning to the EU, I fail to see why anyone would be long here at present, house prices have to go far lower, still some dumb money sloshing around in the system but we as we head into the end of year I can see this going one way only I'm afraid.
"So they do not depend on foreign workers as other big builders do."
Garbage. Every major PLC in this country relies on workers from overseas for their survival, just as the UK economy relies on their tax & NI contributions to pay pensioners and maintain public services. Of course, if people decide to leave this country and make those contributions elsewhere, our public services will suffer. Ring any bells?
In the bank already , its nice to get some good news for a change, well over £3 k
Yep