The first day of full dealing is likely to be positive and, although Questor is bullish on sector prospects, it is probably wise to wait a few days should you wish to make a purchase. It is common for new listings to soar on their first day of dealing, before falling back over the following days and weeks.
There was even more good news for the housebuilders earlier this week as the Council of Mortgage Lenders (CML) revealed that in 2012 the number of first-time buyers purchasing a home with a mortgage was at the highest level for five years.
A total of 216,200 first-time buyers became homeowners in 2012 – the first time the annual total has exceeded 200,000 since 2007. This represented a year-on-year rise of 12pc. In the final quarter of the year, sales rose 14pc.
Housebuilders have been boosting profit because they bought cheaper land following the credit crunch. Because house prices have been relatively stable for the past few years, this means margins have been rising. This land is still working its way through the system but this margin expansion story cannot carry on indefinitely and margins will plateau unless the market gets moving again. The thing that the sector really needs for sustainable growth is for the number of first-time buyers to rise. This is now happening.
Of course, for this to occur lenders must be willing to offer mortgages at higher loan-to-value (LTV) ratios. The CML figures showed that the average LTV for first-time buyers remained at 80pc. However, there was a slight pick-up in purchasers with a higher LTV, with about 3pc of first-time buyers getting a 95pc mortgage in the fourth quarter of 2012, which was up from just 1pc in the final quarter of the previous year. This trend needs to continue.
Questor remains positive on the sector as a whole, despite being nervous that the current broad-based rally could come to an end. Long-term prospects for the whole sector remain sound as the UK is structurally short of housing and the population continues to rise.
It looks like Crest’s float will get off to a good start and Questor keeps a buy rating on the major players. Persimmon is particularly interesting for income seekers as it plans to return £6.20 a share in the form of special dividends over the next nine years. Questor thinks investors keen on Crest should wait and buy on any dips.