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Bellway figures and interest rate hopes boost housebuilders

Discussion in 'Market News' started by Lily, Oct 13, 2015.

  1. Lily

    Lily Forum Member

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    Sector lifted as investors bet negative inflation will keep rates on hold

    Housebuilders are on the rise after better than expected results from Bellway, and expectations of continuing low UK interest rates following negative inflation numbers.

    The builder reported a 44% jump in full year profits to £354m, helped by a strong UK market underpinned by affordable mortgage rates, low unemployment and a shortage of supply. Volumes rose 13% during the year with the average sales price up 5% to £223,800. Chairman John Watson said:

    Bellway has [completed] a record number of new homes...The outlook remains positive and the strength of the forward order book should enable the group to achieve volume growth of up to 10% in the current financial year.

    Whilst it is inevitable that interest rates will rise at some point in the future, new homes remain affordable and the lending institutions continue to adopt a responsible approach towards mortgage applications.

    Bellway’s full year results are ahead of our forecasts and we have upgraded 2016 estimates by 6%. We continue to see Bellway as our preferred play in the sector given its prudent approach to balance sheet management and guidance, alongside the potential for the group to show sustainable volume growth in the medium term provided market conditions remain favourable.

    Sterling fell by 1% against the dollar and the euro this morning, reaching its lowest level against the euro since May as figures showed headline inflation turned negative again last month. The continued lack of price pressures is great news for consumers who are being treated to an early Christmas present with a combination of good deflation amid higher wage pressures. We are continuing to enjoy low energy and food prices which makes a rate hike from the Bank of England harder to justify.

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