Member Info for strictlybricks

PS

My previous comment contained a senior moment on my part….

The recent negative comments referred to were on the Persimmon chat, which I had been reading just before, not here on Taylor Wimps…

Mea culpa ~ sorry about that..!

Strictly

Krusty,

Whatever we individually think of Mr Gove ~ and I wouldn't want to put my thoughts about him down in type here as I generally aim to be good natured & polite ~ it’s worth bearing in mind the cliché that the market hates uncertainty…

And if Gove is true to his word, and is resolute in his stated intention to call time on any builders not fully signed up the cladding reparation scheme by six weeks’ time, that surely leads this towards a conclusion ~ which is probably (though not certainly, obviously) a good thing…?

………………………..

And, separately, it’s a tad disappointing to see a bit of niggle creeping in here on the chat recently, as someone else observed before…

I appreciate that big house builders are not universally popular amongst folk at large, but the fact is that they have to exist in a deeply cyclical sector that can take out household name players if they get it wrong ~ as nearly happened with Barratt and Taylor Wimps in the credit crunch, for example.

In return, over the long term, IF they KEEP getting it right, they can make an average return on capital of around 15% a year smoothed over the property cycle….

Most of the current players haven’t achieved that, but some have….

But the thing is, surely, despite that the government has interfered with the housing market in different guises that has caused resentment in certain sections of society, that is surely not an unreasonable return for the risk & capital required when put up against other sectors in the stock market..?

I’m not necessarily imagining one or two of the recent commenters here agreeing with that ~ but then you can’t win ‘em all, can you..?

Strictly

"Is it not £90m net assets after debt?"

........................

It's all of those in round terms (and, as WB, the man, said, "It's better to be approximately right than precisely wrong").

Net assets are around £90m, having halved from 2021's £180m, so that's a £90m loss, and the debt's roughly £90m.

So the book value per share has also halved, from 80p to 40p, in a year….

What a nightmare…!

So, I put my hand up to say that I am a past sinner, in that I have owned Inland shares but baled out at a loss when they were priced at around 50p.

A potted history might be useful here…?

The Inland boys ~ Wickes & Malde ~ have been around the block before with an outfit called Country & Metropolitan.

Formed in 1990, they took it public in 1999 at an offer price of 68p and sold out later in 2005 @ 300p ~ so that’s a six year share price gain of 340%.

So, the boys had my vote of confidence based on that as, to my mind, a good track record trumps most things.

But, in the light of experience, I now see it differently.

Inland was bought by an Italian character, Remo Dipre (now there’s a name to conjure with..!).

His vehicle, Gladedale, also bought Furlong (the old Telford crew) and Bett Bros (a stellar but small Sweaty house builder who’s loss to the market was disappointing to say the least) around the same time.

Sadly, it seems old Remo wasn’t up to the job of surviving & thriving ~ Gladedale crashed & burned in 2009.

So, my take on things now is:

Perhaps my faith in Wickes & Malde was misplaced..?

Maybe they just got lucky when old Remo came along at the right time ~ just before what was coming down the pike starting 2007, and maybe they would have otherwise similarly become toast thereafter…?

I guess we’ll never know, but it underlines my prime personal rule in investing: Never invest in heavily leveraged companies ~ even if they do look like a bargain at the time.

That was an expensive lesson ~ and I’m not intending telling you how much it cost me to learn that one, though, courtesy of Barratt 2007/8.

But it was a lot..!

Strictly

Mike,

Not all the builders made land bank write-downs following the sh.tstorm of 2007/8 ~ just the FTSE100 boys I think, of the ones I monitor, though Redrow did do a more modest one following the return of Steve Morgan, and the ensuing sacking of the previous management.

I’m 70 and, in my lifetime to date ~ during which house prices have gone up by 1000’s of percent ~ there have been just two significant period of house price falls and these were around 20% on each occasion.

So, the house builders with strong balance sheets back in the day ~ like Bellway & Bovis ~ just worked it all through the system taking the expensive landbank costs on the chin through reduced profitability.

Bellway made minimally negative returns on equity in 2008 & 2009 ~ being (0.9%) & (2.1%) ~ and thereafter returned to profitability, hitting back into ROEs of above 20% by 2015.

If you did a bit of legwork to find out how the builders had fared in respect of increasing their BVPS since their peaks in 2007, you’d no doubt find what I found…

Which is that Bellway are head, shoulders & waist above ALL the others…

Hence their moniker of Ghost Dog within our investing circle ~ you can probably tell we’re quite fond of them ~ though you might want to check out the Jim Jarmusch film of the same name to find out why “Ghost Dog”?
………..

To try to answer your question a tad more directly, let me give you an analogy.

I treat investing like driving in a car… out of the windscreen ahead it’s well foggy, but out of the rear view mirror, the visibility is great…

And the fog follows the car, so it’s always foggy in front and clear blue sky behind.

And, being a lazy & cowardly investor, I’m pretty much always looking out through the rear view mirror and not the windscreen and, thus far, in twenty two years in this game, it’s worked well enough for me…

And if it don’t need mending, and all that….

So, really, I have no idea of how to answer your question… apart from 40 years in the rear view mirror which suggests that, most probably but not absolutely certainly, it’s alright…

So just take a view on whether or not in today’s world you think the shares are well priced ~ and my view is that, most probably but not absolutely certainly, they are, and act accordingly.

That was all probably about as much use as an ashtray on a motorbike, wasn’t it..?

I now have a trek into Newton Abbot for the week’s food shopping lined up, and then a leg stretch up the road onto Dartmoor, so don’t expect an immediate response if you require one…!

Strictly

Mike,

The three FTSE100 house builders all took land bank write-downs following the credit crunch…

In Persimmon’s case, including dividends paid, they’d recovered their 2007 BVPS by 2014.

So far so good, but the other two, Barratt & Taylor Wimps, also had to undergo serious rights issues and these were much more damaging ~ and the upshot is that, & especially in the case of Taylor Wimps, this wiped out so much existing shareholder value that they’re still working their way back up….

So, the moral of that particular story is to avoid heavily leveraged companies like the plague, as it was the high borrowings that necessitated the rights issues…

And I write as a past sinner…

Barratt had been priced around 1,200p when they foolishly borrowed big time to buy Wilson Bowden in 2006…

Given what kicked off the next year, it was like renting a rowing boat just above Niagara….

I’d thought it was folly at the time, and when the share price had dropped to 400p, I felt fully validated and steamed in with a big investment.

It was a very expensive way of learning that I shouldn’t have touched Barratt at any price, even 40p, because of the borrowings.

But all the builders are older & wiser now and all have strong balance sheets with Persimmon & Bellway’s being the strongest….

And Persimmon ~ and this, IMO, is impressive given that they are already the Ryanair of the house building sector in terms of house prices ~ have a landbank that only stands them in at 12% of budgeted sale price…

That’s a lot of freeboard compared to the others…

But I do also hold Bellway & Redrow… check out Bellway’s 40 year track record ~ they really are the “Ghost Dog” of the sector.

My final point is: all the builders have taken a real share price kicking in anticipation of p.ss poor profits to be reported...

But none of them has reported any seriously diminished earnings yet ~ this is still all in the future in respect of what’s in the public domain….

In other words, the likes of Persimmon are more than 50% off their peak price in fear of a sh.tstorm still to come….

So, the expected bad news may or may not now all be baked in, and maybe we’re on the way up now in 2023 given that inflation & interest rates seem to have peaked…?

So, if you’re hanging on waiting for better prices, well, you may or may not prove to be right…?

But one thing’s for sure ~ you’re a braver man than me..!

Strictly

BSA,

Shares can be bought back by a company either to hold as treasury shares or to be cancelled and so reduce the number of shares in issue....

The upside of buying back shares with spare cashflow over and above paying it out in dividend is that the latter is a one time moment of joy for shareholders but then it passes.

Whereas, reducing the shares in issue by going for share buyback is the gift that keeps on giving as it continues thereafter to give enhanced EPS for any given amount of profit.

The usual downside of share buybacks is when they are undertaken at PBVs of above 1.0, which means a reduction in the book value per share ~ take a look at Next shares…

Next seem to have been addicted to share buybacks in the past and yes, it shows in the EPS but then take a close butcher’s at the BVPS over a number of shares and compare that to the growth of, say, Redrow shares, which are for sale at a mere fraction of the value of Next ~ which just goes to show it takes all sorts…!

Whereas, at the prices Barratt have bought their shares back, this is at less than book value so undertaking this not only enhances future EPS it also enhances BVPS.

The risk of course is that they overdo it on the basis that “It seemed like a good idea at the time” but that in six months’ time, if the sh.tstorm we’re going through gets worse (even though the signals from falling mortgage rates and updates from builders over the past week or so including Crest today bode well at this very early stage), they might regret not having kept their powder dry….?

But it does all feel a bit more positive out there even compared with just a few weeks ago…

All the same, it would be good if they could all settle finally with Gove, though, wouldn’t it..?

Strictly

“The only question left............"

PS

My apologies...

You were referring to Redrow, not Persimmon...

My mistake ~ but all of my comment below still applies....

If anything, more so...!

Strictly

“The only question left for me is whether I invest more now, or wait until ex-dividend in February (not far away).”

……………………

Well, it still comes back to the theme of my previous email….

I think Dirty Harry (if you’re old enough to remember him….?) would have put it somewhat more bluntly, but do you think you can call the short term movements of the market…?

If not, and if you let go of concern about whatever the market may do on Monday, or next week, or next month, or next year, are you able to take a view on whether or not Persimmon is cheap on any long term historical basis…?

This, in my opinion, is a more reasonable thing to take a view on, and if you feel comfortable doing that you surely then have your answer...?

And the other thing that is also relatively much easier IMO (I mean easier than the impossible task of calling the short term market, which IMO is a nutter much of the time ~ though you may be a camp follower of Efficient Market Hypothesis..?) is to call the value between the different house builder shares based on the share prices of each of them at any time…

Twenty years and counting at this says it works…

Strictly

“Would appreciate your opinion as to why this has suddenly taken off…”
……………………

Giraffe, if you’ll excuse the pun, the reasons for short term share price movements do not tend to be something I stick my neck out on….

However, I only yesterday wrote a long spiel for a private blog for house builder shares that my crew participate in, and maybe part of that may be of moderate use to you..?

I tend to play with the numbers in all sorts of ways and occasionally something will give me a bit of further insight ~ it can be akin to making slices through an apple to find out if there is a maggot lurking…?

And I put together a table showing the past decade’s track record of the seven builders that are on my radar ~ and these are: Barratt, Battersea (now Vistry), Bellway, Crest, Persimmon, Redrow & Taylor Wimps.

The table shows the average BV growth per year, the average dividend yield on current price, and the sum of those two numbers.

In respect of the sum of the numbers, Persimmon came out on top with growth 7.4% + yield 10.2%, = total 17.6% and Redrow were second, on growth 13.8% + yield 3.2%, = total 17.0%.

And a first glance therefore says Persimmon is best value.

But this is not so, it is Redrow ~ because while they have a slightly smaller sum total, their growth is much higher, and over any reasonable period of time this soon trumps Persimmon.

I have banged on about this here at times, I mean in respect of the painful financial long term consequences for shareholders of Persimmon’s “King Jeff div”, though I suspect I’m largely shouting into a void…?

But King Jeff is now long gone, and the new team is intending taking a more balanced approach…

And part of my research for my blog article was to look at the shape of things if Persimmon had historically only paid out half in dividends.

This translated into their total increasing from 17.6% to 19.7%, and so increasing the gap between Persimmon & Redrow from 0.6% to 2.7%.

But this STILL leaves Redrow top dog for the longer term because their growth is STILL slightly higher…

So, the upshot of all this waffle is that while, based on all the above, Redrow remains best in show for the longer term, the fact is that you can never-the-less buy Redrow shares significantly cheaper at a PBV of 0.92 against Persimmon’s 1.27.

So while I’m not intending to try to give you any share buying advice ~ I don’t even do that for my own flesh & blood ~ I would suggest you ask yourself whether you’re in it for the long term and whether you think you have some sort of crystal ball for short term share prices, or whether, like Warren Buffett, you think it’s safer to be a “rear view mirror” investor and so aim to use the past as the best indicator for the future.

If you do that, it’s then largely down to how well you can ascribe fair value between the different house builder shares.

Strictly

Krusty,

I would echo that thought....

And thanks, Ben, for your comments here....

Strictly

If one takes into account what the other two FTSE100 house builders have paid out as a percentage of earnings, on average, over the past ten years, it's been 47% for Barratt and 57% for Taylor Wimps...

So my estimate for Persimmon from here is a 50% payout until informed otherwise…

Bearing in mind that the previous big div payout was set up in the time of King Jeff, when he was working towards his eye-watering, and now infamous, nine figure bonus, and it may just have been that he wasn't necessarily fully focused on what was in the best interests of the shareholders at the time…?

And I'm not saying that that was the case, only that it might have been, given that he was paying out most of what were fantastic earnings in dividends through the best part of the property cycle.

In my view (and I suspect not everyone will agree here as this argument has not necessarily gone down well in the past), this was spaffing the earnings to a large degree given that Jeff was stunningly successful in driving the share price up to 3 x book ~ which was truly vertiginous for a house builder share taken on any historical basis over the past 40 years.

As I have mentioned before, this effectively meant that for every 3 parts of book value taken out of the company in dividend (that could otherwise, no doubt, have been growing at more than 25% a year at the time along with the rest of the retained capital) an investor could only buy one part back if he wanted to reinvest into Persimmon.

For both these two reasons ~ the big div payout and the big price to book value ~ I had kept well clear of Persimmon shares until recently.

And there was also a third, darker, reason, in that I didn’t entirely trust the accounts while the bonus scheme period was in play, but subsequent figures, and significant research into Persimmon, since, has shown that I was being overly-cautious…

So, that leaves the first two reasons, and they have now potentially both been resolved…?

Persimmon’s PBV is now just over 1.0 as opposed to the previous 3.0 ~ which means that there’s now only a fraction of the previous evaporation of value through dividends paid & then being reinvested.

And as part of this, Persimmon are intending to retain more earnings so, ceteris paribus & all that, this should equal faster growth ~ and I have looked pretty hard at this and I am not seeing why Persimmon can’t continue to progress at a better lick than the other house builders as before.

This means they have more freeboard than the others ~ if house prices fell suddenly by 15%, Persimmon should still make a profit, but that doesn’t necessarily apply universally elsewhere…

The upshot of all this is that, as of October last year, I am now the proud owner of a bunch of shiny Persimmon shares, currently about 35% of portfolio…

Most of the crew on our private blog are not entirely convinced ~ but then they’re all over 18 & old enough to fight & die for their country…!

Strictly

Denby,

There’s the proverbial Pandora’s Box to potentially be opened here, I would say, but I suppose it depends on whether you’re in this for the long term as a buy & hold investor, or looking for a price bounce soon and then off….?

I did take a quick look at your past posts and it seems your only house builder share is Persimmon..?

If you’ve read some of my past stuff, you’ll probably understand that, as the name implies, I invest across house builder shares ~ and only house builder shares ~ and have done so for about twenty years (apart from a partial & brief ill-advised foray into some supermarket shares some years ago, but I fortunately got away with that one…).

My point is that, with the exception of having partially swerved the covid tsunami, I have remained fully invested throughout the past twenty years come rain or shine.

And because my game is switching between different house builder shares, I am preoccupied with perceived relative value and not at all with price (notwithstanding the risk of takeover, and therefore loss of the opportunity of trading in a particular share ~ especially as the range of suitable candidates for ownership for me is very limited).

Persimmon’s dividend policy resulted in its share price rising to three times book.

Which meant that 30p of dividend received & immediately reinvested back in only achieved 10p of underlying value.

The other two thirds thus evaporating as far as an individual investor was concerned…!

And given that Persimmon, up to now in recent years, has paid out nearly all of its superb earnings in dividends, this has harmed the value achieved by the share over the long term relative to other house builders that make inferior profits to Persimmon but retain most of their earnings for growth.

It helps if you like playing around with spreadsheets for this stuff ~ such that, if you input the right figures, you might find that if you’d bought Persimmon shares at the start of 2013 @ 800p and had reinvested dividends on the day received ever since, you’d be up 190% as of today.

Whereas, if you’d bought Redrow at the same time, @ 161.5p, and had done similar, you’d be up 295%.

And further, if you were prepared to call the relative value against other house builders… (not easy, but much less difficult than calling the value against cash ~ as who is able to do that…?) there is the potential of significant further gain to be had from moving around between different house builder shares pursuing perceived best value.

But that’s then back to my point earlier on ~ you may only be interested in buying & holding the one house builder share, i.e. Persimmon, and also you may not be that concerned about what is happening with underlying long term value & progress…?

In which case, what I’m saying is probably not particularly relevant to you…?

Strictly

"SO strictlybricks the board are playing courses with the dividend and you recon that the div will be halved??"

..............................

Denby,

I don't know what Persimmon will pay as div but they have said that they're intending changing policy from the previous one instigated by King Jeff and, as from now, retaining more for growth ~ which in my view is a good thing providing the growth comes at the same sort of best-in-show margins that they've enjoyed up to now in recent years...

In the absence of current trading updates, I’m working with the scribblers’ estimates of forward earnings.

On the Yahoo Finance website, the EPS estimate for 2022 for Persimmon is 243.2p.

So, allowing for the 50% of earnings pay-out that I’m going with as an estimate, this gives a 121.6p dividend.

This is not crystal ball stuff, it’s just the numbers I have pencilled in and of course I’m almost certainly going to be wrong to some extent though, at the same time, I’m not imagining that I’ll be hugely wrong ~ but maybe we’ll know more with the update due next week…?

Strictly

Mike,

Without checking back as I’m out right now, your number sounds correct.

As for what the dividend will be, Persimmon have declared that they intent to extract themselves from the corner that King Jeff painted them into (that’s my words for that, not Persimmon’s BTW) but haven’t disclosed what the standard payout ratio will be though they have said that they will make extra payouts when cash flow says yes.

So, in order to comply with the notion of being approximately right, I’m budgeting for a 50% of EPS payout

Strictly

“Q though if you don't mind which I simply cannot find anywhere online or maybe I'm simply misunderstanding the basics - does anyone know how much Persimmon 'spends' in a typical year building its units etc”

.......................

Mike,

I’m not sure how useful that information would be of itself…?

Not only are house builders much better financed overall now as compared to going into the credit crunch era of 2007/8…

There’s also that, as far as I understand, they are now more likely to be building as they go, even if not necessarily strictly to order but to pace the construction against the rate of sales.

They also take proper deposits, typically 5% I think, & exchange of contracts in many/most sales ~ so customers have enough skin in the game to have to think real hard before considering pulling out of a purchase.

So the game is somewhat less speculative now though I don’t have hard numbers on this (as compared to, if you’ve read many of my previous posts, you will no doubt have picked up that I’m generally VERY numbers based..!).

My point is, I don’t see that there is any requirement to cash flow build costs for a year so the scenario seems somewhat hypothetical…?

I do have some other specific numbers up to 2019, though (I haven’t seen these from the builders since then, for whatever reason?).

For Persimmon, their build cost as a percentage of house price fell steadily from 62% in 2010 to 53% in 2019.

This is as compared to Taylor Wimps, whose build cost as a percentage reduced from 69% to 60% over the same time scale.

And I do also have a building plot comparison though this is against Redrow and Bellway as I couldn’t find any for Taylor Wimps when I wrote about all this is some detail in November in a long post in a private investment blog.

In 2011, Persimmon’s plot cost as a percentage of sale was 20.4%, reducing to 12.0% in 2022.

This compares to Redrow over the same time scale going from 21.8% to 20.1% (i.e. pretty static as a percentage) and Bellway from 20.4% to 17.8% (so not much movement there either…).

So taking all the above into account, and taking on board Warren Buffett’s maxim that it’s better to be approximately right than to be precisely wrong, it’s pretty easy to see where Persimmon’s a.se-kicking returns emanate from, isn’t it..?!

Strictly

“1. Can builders control variable costs ? So a 10% fall in sales if accompanied by similar fall in costs is excellent.”
……………….

Banbury, this is a valid consideration, and it’s perhaps worth expanding it out a bit more….?

By which I mean, a 10% fall in sales may be deemed to be long-lived or short-lived and, if the former, it’s surely likely that any company would go to greater lengths to reduce costs…?

Then you’ve got costs above and costs below the gross profit line, and the former can be reduced more easily than the latter to accommodate any perceived forward downward shift in sales.

And then, apart from a 10% fall in sales, it could be a 10% fall in prices, or a combination of both…?

Using figures from Market Screener (which tends to be somewhat pessimistic as against Yahoo in outlook, but they don’t give these numbers…), Persimmon’s forecast gross margins, for the current year and next, are 23.0% and 20.4% respectively.

This compares to Barratt 16.9% & 12.8%, and Taylor Wimps 18.7% & 15.1%.

In other words (ceteris paribus, & all that, of course…), if there was a sudden 20% drop in house prices, Persimmon would still make a modest profit this year and break even next year.

Whereas the other two would be into losses for both years ~ and substantially so for Barratt for next year.

This is why, as I’ve said in my previous comment here, I have a substantial holding of Persimmon shares even though they are significantly more expensive than the other two on a PBV basis.

The builders tend to buy land & build with a hurdle rate based on a target sale price, and sell on that basis with it all coming together in an average sales rate per week per site…

As we know from the most recent trading updates last year ~ which were still early days into the Kamikwazi market upset ~ the sales rate had dropped right off since that moment….

But there were various factors in play for this…. interest rates needed to go up even if Liz & Kwasi had never briefly set up camp in Downing Street, but the suddenness of change has spooked everyone…

Especially the lenders…!

Then there’s the spike in inflation, not being matched by pay rises (otherwise, house prices could stand still yet still be 10% cheaper in terms of affordability).

Then there’s that leading up to Crimbo is generally not the best time for house sales.

But now we’re into the New Year and looking forward to the spring when the house sale market tends to be more buoyant and, whatever the appropriate collective noun is for trading updates, well, we’ve got that coming up over the next fortnight…

Strictly

Hamm & Steve,

While there's room for speculation about the numbers we don't know because they remain in the future, it's generally helpful to use accurate numbers where we do have them.

Using the FT.com graphing tool, Persimmon's share price fell to a low point on 3rd December 2008 and that was 150.7p.

That equated to a price to book value of only 0.35 based on the tangible book value per share as at the end of December 2008 of 430p...

While obviously the market wouldn't have known the actual BVPS figure until a couple of months or so later when the accounts were issued, it was a time of fear & frenzied speculation back then and the market over-reacted…

As it does…!

Persimmon’s negative return on equity was minus 30.6% after eliminating goodwill & intangibles (because Persimmon have always liked a bit of that) at each end.

Thereafter, Persimmon steadily recovered their mojo, making an ROE of only 5.6% the following year but by 2015 they had increased this steadily to approaching 30% and were best in show for the sector.

This compares with the scribblers' forecasts this time round of an ROE of 22.4% for 2022 and 15.3% for 2023.

These are positive figures, not negative as in 2008.

The above ROEs are calculated using Yahoo Finance’s latest forecast EPS figures of 242.5p for 2022 & 144.4p for 2023, and then assuming a 50% of earnings div.

Persimmon therefore remains best in show for forecast as well as actual, ROE, and their PBV reflects this ~ currently 1.09 as against the other FTSE100 builders, Barratt on 0.88 & Taylor Wimps on 0.85.

Persimmon have a seemingly ridiculously low cost of land as a percentage of house sale price ~ around just 12%, which largely accounts for their superior ROE.

It seems to me that, of the major house builders, they have the most freeboard and therefore are best placed to weather whatever sh.tstorm may, or may not, be coming down the pike at us this year..?

This is why I hold Persimmon shares now, even though they are pricy in relative PBV terms.

I’m up for a sensible discussion about all this (as the name implies, I only invest in house builder shares and Persimmon is 35% of my holdings, the remainder mostly Bellway and with a smaller holding in Redrow so I very much have a vested interest here) but, please pretty please, at least base it on accurate numbers where these are available…!

Strictly

"Next year it will though, especially when house values have plummeted 50%"
..............................
Tomski ~ and assuming that you posted that as a serious comment and not just as a wind up? ~ you may be right about the 50% fall…?
I don’t know, as I don’t happen to drink with the Captain (as in Hindsight).
But, as ever, I reckon it’s helpful to wrap some numbers around this in order to hopefully more likely end up with a useful discussion rather than risk descending into toxicity ~ as these things can do ~ though, to be fair, the LSE chat isn’t as prone to that as the comments sections for investing articles in the Telegraph online.
I was born in 1952, and that year (all these numbers are from the Nationwide’s statistics, readily available on their website) the average price of a house was £1,891.
Fast forward to Q4 2022, and the average price of a house is £265,195.
That’s an increase of 13,240%
During all that time, there were only two significant periods of house price falls,
That was from Q3 1989, £62,782, down to £50,168 in Q1 1993, a fall of 20%.
And the second was from Q3 2007, £184,131, down to £149,709 in Q1 2009, a fall of 19%.
Unless Nationwide are either lying or mistaken, those are the numbers.
My point is that the house price falls during my life so far have been way less than what you are suggesting is coming down the pike at us and have only been relatively brief interludes that amounted to just a smidgen of the thousands of percent overall price increase for the past seventy years.
So, what exactly are you imagining might drive a 50% house price drop from here? (and I’m not saying it can’t happen, I’m only posing the question…..).
Especially now we have an ever-increasingly nanny state prepared to throw money at ever more problems that arise; rampant, out of control immigration and increasing family breakup all helping to drive demand; and, now, increasing inflation which brings real cost of housing down more quickly anyway.
And if you look at a 700 year graph of interest rates (and you can find such things on Google and somewhat surprising & eye-opening they are to see, too…), while their nature is to progress through time in a waveform, the overall direction of travel of interest rates over the long term has been downwards.
And I would say that 700 years is probably a long enough timescale to indicate a trend…!!

Strictly

Krusty,

Sorry for the tardy reply ~ I’ve only just come onto LSE BDEV chat and seen your comment…

Referring back to the numbers in my previous comment here, the big contrast in the differing fortunes of Bellway on the one part and Barratt on the other (and for Taylor Wimps it was even worse than for Barratt) due to the credit crunch is largely down to the big contrast in the relative amounts of balance sheet leverage of the different companies…

So that’s now been sorted in respect of all the above ~ none have excessive borrowings compared to last time ~ so one hopes that the lesson about not getting ahead of themselves financially has been learned..?

But another element to this ~ one which I have reflected upon ever since the credit crunch, but which I never seem to see discussed elsewhere other than in our crew’s investing blog is this:

Just imagine if we’d had a government at the time of the credit crunch that had had a bit of wisdom & foresight ~ sufficient to say to the house building industry “Don’t slow down the sausage machine, don’t send home the Polish plumbers, the Bulgarian brickies and the Czech chippies ~ we’ll guarantee to take your surplus production off your hands for social housing at cost plus x until the economy & the market turns around”.

If they’d done that, which would also have meant that the brick kilns wouldn’t have had to shut down (as you can’t just switch those on and off like a kettle), the industry could surely have just kept chuntering on with building at full steam ahead instead of more or less halving in the interests of survival and which has caused damage to production capacity that seems still not fully resolved..?

Whereas, by sharp contrast, look at the money thrown at the banking sector at the time ~ considering that, as Basil Fawlty might have put it, “Well, they started it..!”

So, if it does start looking like push is coming to shove next year for house builders’ travails, maybe, just maybe, there’s a lesson from the credit crunch in there for the government to learn too…?

Because it’s not just the nasty house builders that are harmed by this (by “nasty”, I mean that the companies we’re invested in seem to have something of a poor rep with the public at large).

Mind you, I’m definitely not holding my breath on that one…!

Strictly

Rogue,

To put some numbers to this for a comparative perspective against Taylor Wimp's peers ~ Barratt, Bellway and Redrow...

Taylor Wimp's is bottom of the pile in terms of profitability for the most recently reported full accounting year, with an ROE of 12.9% against Bellway 15.5%, Barratt 16.0% and Redrow 17.9%.

On that yardstick, therefore, Wimps should reasonably have the lowest PBV to be on par in terms of fair value.

However, at a PBV of 0.86, it is second only to Barratt on 0.90, with Redrow at 0.82 and Bellway at a much lower 0.70.

So, taking just the two ratios above, Taylor Wimps is currently more highly regarded by the market against the others.

This, of course, involves no prediction whatsoever about where the price may or may not go from here....?

Strictly