Britain’s housebuilders will recover strongly
Economic recovery will be ‘V-shaped’ and house prices and property transactions will come roaring back, one investor says
ByRichard Evans1 April 2020 • 6:00am
Coronavirus housing woes are likely to be temporary, believes one fund manager
“The collapse in house prices won’t last – as soon as the economy normalises there will be a boom in housebuilding and property transactions.”
This is one fund manager’s optimistic assessment of Britain’s currently comatose housing market. The manager, Barry Norris, is worth listening to as his Argonaut Absolute Return fund is among the small number to have made gains this year: it has risen by about 23pc while the FTSE 100 has lost 25pc.
He backed his belief that the housing market’s woes will be temporary by buying shares in some of Britain’s housebuilders last week.
“Some of these shares halved in the space of a month,” he said. “I’ve made good money during the crisis so far by ‘short-selling’ certain stocks but I’ve started to think about the economy’s eventual return to normality and who will be the winners then.”
He explained why he expected housebuilders to be among them.
“The structural imbalance in the housing market won’t go away: there are still more people who want to buy a house than there are homes being built,” he said. “I don’t expect a credit crisis this time – the damage from coronavirus will be felt most keenly in sectors such as travel and hospitality – so banks should remain able to lend. And Bank Rate is now just 0.1pc.”
He said the extraordinary stimulus promised by governments and central banks should enable the economy to enjoy a “V-shaped recovery” as soon as the medical emergency ended.
As soon as we get the all-clear to go back to work the economy will return to where it was before or perhaps even be stronger,” he said. “The housing market may be dead for two months but as soon as the economy normalises there will be a boom in transactions and prices should return to where they were before.”
He also said he expected the Government to reduce stamp duty in an attempt to get the market moving. “Stamp duty rates have become ridiculously high. At the top end they are 12pc, compared with 5pc under Labour,” he said. “Boris Johnson has said he wants to go back to previous levels. If he wants to get the economy going he needs to make it easier to buy and sell property and stamp duty is the biggest impediment.”
Mr Norris said the housebuilding sector’s current shutdown would be a danger to builders if they had debts but most had cash and therefore a “margin of safety”. A
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