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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March 1, 2024

RMV, KIE, BBOX | Economics – House prices and mortgage approvals rise; Zoopla forecasts 10% rise in house sales | News – 99% mortgage plan dropped; Council moves hundreds of tenants following concrete fears | Fortnight ahead

Company news

Rightmove (RMV, 567p, £4,543m)

UK’s leading residential property portal. FY (Dec) results. Rev +10%, £364m; PBT +7.7%, £260m; u-lying EPS +6%, 25.2p; div +9%, 9.3%, net cash £33.6m (FY 22, £35.1m).

Trading: Total membership -1%, 18,785; New homes developments -4% since start of the year. Average rev per advertiser +9%, £1,431 per month “as customers continued to upgrade their packages and increase their use of digital products”. Website traffic -5.5%, 15.4 billion minutes.

Outlook: “ARPA growth of £100 – 110, driven by the new Optimiser Edge package, ongoing product uptake and contract renewals, with overall revenue growth of 7 – 9%. Customer numbers are likely to drop slightly, given the ongoing uncertainty in the macro environment. We will continue to invest in innovation for both our consumers and our customers, and into accelerating our strategic growth areas of commercial real estate, rental services and mortgage lead generation, while maintaining disciplined cost management. We anticipate an underlying operating margin of 70% in 2024. Our capital allocation policy remains unchanged. The strength of our business model, coupled with ongoing innovation, underpins the Board’s confidence in Rightmove’s outlook for 2024 and beyond”.

Kier Group (KIE, 136p, £607m)

Hybrid construction, property and services group. ESG. Kier announces that it has met the criteria to achieve the London Stock Exchange Green Economy Mark, and received verification from the Science Based Targets initiative for its emissions reduction targets, including the commitment to reach net-zero across the value chain by 2045.

Tritax Big Box REIT (BBOX, 147p, £2,791m)

Real estate investment trust investing in ‘big box’ logistics properties, making possible all-share offer for UK Commercial Property REIT (UKCM). FY (Dec) results. Rent roll +0.6%, £225m; PBT, £70.0m (FY 22, loss £599m); adj EPS -0.5%, 7.75p; div +4.3%, 7.3p; EPRA TNAV, 177p (180p); portfolio value unch, £5.0bn; LTV 31.6% (31.2%).

Trading: “Occupational market supported by enduring long-term structural drivers”. 22.1 m sq ft of UK lettings (38.0 m sq ft), “in line with the 23.3 m sq ft pre-covid average”. Vacancy rate, 5.1% (2.0%). Space under construction back to pre-covid levels at 21.4 m sq ft. UK ERVs +7.2% (10.6%). Prime yields, H2, 5.25% (5.0%).

Outlook: “We are confident in delivering our strategy and are well positioned to take advantage of the opportunities both inherent within our business, and from an increasing number of opportunities in the market. The group has very good potential for long-term income and capital growth, supported by enduring structural drivers in the logistics real estate market.”.

Economic data

House prices in February turned positive on a Y/Y basis for the first time in 13 months, rising 1.2% following a 0.2% decline in the year to January, according to the Nationwide House Price Index. Prices rose 0.7% seasonally-adjusted to £260k, the same increase as in January, after prices bottomed out in December at £257k. Despite the latest rise, prices remain 4.9% below the pre-mini budget peak of £273.8k. The report highlights “signs of easing in affordability pressures”, including the house price to earnings ratio falling to 6.1x from 6.9x in Q2 22.

House Price to earnings ratio

Mortgage approvals rose by 7.2% on a seasonally-adjusted basis between December and January to 55,227, the fourth consecutive monthly increase, highlighted in yesterday’s Money and Credit statistics from the  Bank of England. The effective interest rate on newly drawn mortgages fell by 9 basis points, to 5.19% in January. The rate on the outstanding stock of mortgages increased by 5 basis points to 3.41% in January. Next release, 2 April.

Economic research

Housing market. Home sale volumes are forecast to rise 10% Y/Y in 2024 in a flat pricing environment, Zoopla predicts in its latest House Price Index report. UK house price inflation has slowed to -0.5%, with seven regions with positive annual price inflation, offset by price falls in five. Conversely, all measures of activity have risen with sales agreed up 15%, following five months of recovery in momentum. A fifth more homes are for sale than last year as sellers return. The research identifies a ‘three-tier’ housing market split between southern England, London and the rest of the UK defined by affordability.

house Price inflation

In other news …

Mortgage lending. Government plans for 99% mortgages have been scrapped after backlash from banks, Daily Telegraph (paywall). Chancellor Jeremy Hunt has dropped plans for a scheme that would enable first-time buyers to get on the housing ladder with a 1% deposit, just days after it emerged the Treasury was considering the move. Hunt’s move follows lenders’ warning over a surge in defaults among borrowers.

Building safety. Hundreds of people living in council housing in Aberdeen are being told to leave their homes because they contain reinforced autoclaved aerated concrete panels, The city council is writing to tenants after a structural engineers report recommended they be relocated to alternative accommodation because of fears the concrete panels could fail. Last year a survey of thousands of homes in the city found RAAC panels in around 500 homes in the city’s Balnagask area, including 364 council properties. Officers are currently exploring options for the long-term viability for the site, which include remedial works or demolition.

Fortnight ahead

010324 Fortnite ahead
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