Shares in most of the big housebuilders have fallen on talk that the Government could potentially scrap the Help to Buy scheme earlier than planned. Barratt Developments (BDEV), Persimmon (PSN) and Taylor Wimpey (TW.) are worst hit with more than 3% declines in the value of their shares.
The investor worry relates to an article in trade magazine Property Week which says the Government has called for a review of Help to Buy which helps individuals to purchase a property.
Investment bank Liberum says the equity loan scheme is very important for housebuilders as it is used in 38% of private completions.
It says removing the scheme would impact margins at sales rates at housebuilders.
Help to Buy is currently scheduled to end in April 2021. The new media article suggests the Government could alter the scheme, whereby it may only be available to first-time buyers or reducing the selling price cap from £600,000, cites Liberum.
The investment bank says among the UK-listed housebuilders, Berkeley (BKY) makes very limited use of Help To Buy and McCarthy & Stone (MCS) has no exposure at all.
Berkeley’s share price falls 2.3% to £34.54 on the news and McCarthy & Stone drops 1.5% to 163.8p.
‘Most new house sales are completed at a discount to list price, but we understand that Help to Buy transactions tend to be completed at much smaller, or often no discount, to list price because the purchaser's incentive is actually the Help to Buy package,’ says Liberum.
‘Full or partial ending of Help to Buy could reduce the margins achieved by housebuilders - we would estimate in a worst case scenario by around 2 percentage points (about 10% of profits).
‘Replacing Help to Buy with companies’ own shared equity schemes, which were offered before Help to Buy was introduced in April 2013, could mitigate the impact on sales rate, but would prove costly to margin.’
Liberum says it has been told by housebuilders than many house buyers use Help To Buy even though they don’t actually need it. That would suggests any drop sales would be less severe than one might expect, should Help To Buy be withdrawn earlier than planned.
It notes MJ Gleeson (GLE) and Persimmon could come out best in this situation as they are selling at lower price points. Gleeson’s shares are unmoved at 680p in early trading on 4 August.
