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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May 10, 2024

RMV, CRN | Economics – Construction output dips in March | Fortnight ahead

Company news

Rightmove (RMV, 573p, £4,551m mkt cap)

UK’s leading residential property portal. AGM.

Guidance: “Our expectations for revenue and profit for the full year are unchanged”.

Trading: Market – “Rightmove’s House Price Index reported the average asking price for properties coming to market increasing by 1.1% month-on-month, with annual house price growth of 1.7%, the highest for 12 months. Sales agreed between January and April are 17% higher than the same period last year, with both sellers and buyers now increasingly looking to transact, and we continue to anticipate total sales transactions of 1.1 million in 2024.  Completion times remain lengthy, with an average of five months between an offer being accepted and completion. According to our latest Rightmove Rental Tracker, the rental market remains very busy, with an estimated 50,000 properties needed to return the supply of rental properties to pre-pandemic levels.  With an 18% increase in listings availability in the first four months of 2024 compared to the same period in 2023, rental agents received an average of 14 leads per available property, and average rents were 7.6% higher than the same period in 2023”. Financial – “Estate Agency, net membership increased by c.250 since the 2023 year-end, due to strong agent retention and particular strength in the lettings market. Our digital end-to-end solution, Lead to Keys, attracted over 70 new partners to Rightmove and over 170 existing partners added the product to their subscription. Independent agent subscriptions to Optimiser Edge now exceed 700, ahead of our expectations.  Our current expectation is that agent branches will increase by up to 2% during 2024 relative to 2023, ahead of our expectations earlier in the year. New Homes has seen over 90 new developments added to our new, entry-level Access package, which is tailored specifically to housing associations. Based on the overall market context for developers, we expect the total number of developments for 2024 to remain relatively flat on 2023. Average revenue per advertiser (ARPA) growth, excluding the recent change in customer mix, would be in line with our previous guidance of +£100-110.  There has been no change to Rightmove’s longstanding approach to contract renewals and pricing, and our usual discussions in the period have proceeded as expected”.

Outlook: “Overall, we continue to expect a better year for the UK property market in 2024 than in 2023. We have a growing, innovative portfolio of digital services, exemplified by strong take-up of Optimiser Edge and an increase in lettings branches and affordable new homes developments.  We remain confident in achieving a year of good financial and strategic progress and are focused on driving further long-term platform growth”.

Cairn Homes (CRN, 141p, £912m)

Leading Irish housebuilder. AGM.

Guidance: “The company reaffirms FY24 guidance: c. 2,200 units; operating profit of c. €145m; and ROE of 15%. The company remains committed to distributing surplus cash to shareholders and our significant cash generation in 2024 and beyond will continue to fund consistent shareholder returns. The remaining c. €13m in the FY 23 share buyback programme is expected to complete shortly, at which point the company will issue a further capital allocation update”.

Trading: “Demand remains exceptionally high across all tenure types. In our core first time buyer market, state supports for our customers, a more favourable mortgage market and the limited supply of competitively priced starter homes are driving the positive momentum in our business”. Total closed and forward orderbook, over 2,750 new homes and a net sales value in excess of €1.05bn (29 February, 2,473, €946m). First three forward fund transactions will deliver nearly 1,300 Social & Affordable new homes, with the first transaction at Parkside (368 new homes) expected to close in the short-term and the other two transactions expected to complete in H2 2024. Agreed commercial terms with a leading university for the forward funded delivery of c. 500 student beds in a scaled development adjacent to their campus. “The student accommodation market is significantly undersupplied and the Government has recently launched a new initiative with long-term funding to increase the supply of affordable student housing”.

Outlook: “The broader industry is ramping up completions and Government initiatives are working”.

 

Economic data

Construction output fell by 0.4% in volume terms in March, ONS. The decline reflected decreases in both new work (-0.7%) and repair and maintenance (-0.1%). Five out of the nine sectors saw a fall in March 2024, with the main contributors to the monthly decrease seen in infrastructure new work, and non-housing repair and maintenance, which decreased 3.6% and 2.4%, respectively. Quarterly output fell 0.9% in Q 1 solely from a decrease in new work (-1.8%), as repair and maintenance increased by 0.3%. Total construction new orders increased 15.9% Q/Q; mainly due to private commercial new work and public other new work, which increased 27.9% and 43.8%, respectively. The annual rate of construction output price growth was 1.5% in the 12 months to March 2024; this has slowed from the record annual price growth in May 2022 and June 2022 (10.7%). Next release, 12 June.

Viewpoint: Construction was a drag on the better than expected GDP growth of 0.6% (vs 0.4% consensus) in Q1, also announced today, partly reflecting poor weather. Assuming a positive double whammy in Q2 of catch-up on sites and (at least in my view, based on a recent recovery in housebuilders’ land buying) an increase in housing starts, there could be another positive surprise in GDP next quarter.

Contruction Output

Fortnight ahead

10 May Fortnight ahead
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