Property & Construction Daily

The Property & Construction Daily provides a sector-specific comment from leading analyst Alastair Stewart. His daily perspective provides a round-up of market statements, news, economics and views from the property and construction sectors.

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February 7, 2023

House prices stabilise after four months of falls – Halifax | ALU, PRSR |

Company news

The Alumasc Group (ALU, 165p, £59m mkt cap)

Sustainable building products, systems and solutions provider. HY (Dec) results. Rev +5%, £45.0m; u-lying op margin, 13.4% (H1 22, 15.3%); u-lying PBT -11%, £5.6m; stat PBT -15%, £5.3m; u-lying EPS -13%, 12.3p; interim div +1.5%, 3.4p; net debt, £6.8m (£4.1m).

Trading: “This was a strong first half performance, against a comparative that included significant sales to Chek Lap Kok airport in Hong Kong”. Building Envelope division, rev +29%, £18.3m; Housebuilding Products +24%, £7.0m; Water Management -14%, £19.6m “reflecting significant export project sales in the prior half year”. U-lying op margins rose in Building Envelope and Housebuilding Products, but fell in Water.

Outlook: “Building Envelope and Housebuilding Products [have] good momentum going into the second half. Water Management has seen lower first half export volumes, but a stronger performance is expected in H2 as a result of the next phase of the Chek Lap Kok airport project and other overseas project phasing. As a result, the Board remains confident in its full year expectations. With a clear strategy and the majority of revenues directly linked to sustainability benefits to its customers, the group remains well positioned to deliver long term market outperformance”.


The PRS REIT (PRSR, 90p, £493m)

Real estate investment trust investing in private rental sector (PRS) family homes. Update on net asset value and dividend declaration (Q2, Dec). As at 31 December, NAV on an EPRA NTA and IFRS basis was 117.1p (30 June, 116.4p; December 21, 104.3p). The rise principally reflects strong estimated rental value growth of 5% since 30 June 2022, underpinned by high demand for the company’s homes. LFL rental growth on stabilised sites on an annualised basis was 5.7% (YE 30 June, +5.1%), with rental growth on lets to new tenants averaging just above 10% and marginally below 5% on renewals with existing tenants. Q2 dividend, 1.0p: 75% Property Income Distribution and 25% Non-PID.

Economic data

House prices. UK house prices stabilised in January after four months of declines, according to the Halifax.. Prices were unchanged over December, at £281.7k (compared to consensus of -0.8%), following declines of 2.4% then 1.3% (revised from -1.5%). This brought down the Y/Y rate to +1.9%, from +2.1% in December. The rate of annual growth slowed in all nations and regions during January. According to the nation’s biggest mortgage lender: “We expected that the squeeze on household incomes would lead to a slower housing market, particularly compared to the rapid growth of recent years. As we move through 2023, that trend is likely to continue as higher borrowing costs lead to reduced demand. For those looking to get on or up the housing ladder, confidence may improve beyond the near-term. Lower house prices and the potential for interest rates to peak below the level being anticipated last year should lead to an improvement in home buying affordability over time”.

Viewpoint: It will take a month or two to indicate whether this moderating rate of decline continues – as I suspect. Remember, this is only a snapshot of mortgage lending; cash sales may have a different dynamic – not impacted by higher borrowing costs, but possibly giving buyers more heft in negotiations with sellers. The stronger than expected January result may give the ‘hawks’ on the Monetary Policy Committee more ammunition to raise rates further in the short term.

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