Britain’s biggest housebuilders are set to boost payouts to shareholders by £1billion a year – even after the lucrative Help to Buy scheme ends.
In a startling analysis, builders are forecast to increase dividends by a huge 40 per cent over the next five years. That would take annual payouts to investors to £3.6 billion, up from £2.6billion from the largest nine builders in 2019.
The analysis, from housing market gurus at HSBC, comes after renewed confidence in the sector pushed builders’ shares to record highs on Friday.
A Persimmon housing development. Housebuilder dividends are set to rise
Last week, official data showed house prices had risen in every region in the UK for the first time in two years – at an average of 2.2 per cent – thanks to a ‘Boris bounce’ from the resounding Conservative Election victory in December.
Even so, critics had expected the industry’s dividend bonanza to finish when the controversial taxpayer-funded Help to Buy scheme ends in March 2023.
The scheme, designed to help young buyers, has been credited with fuelling record dividends as well as bonuses for fat-cat bosses, and for propping up house prices since it was introduced by former Chancellor George Osborne in 2013.
The top nine housebuilders are expected to suffer a fall in profits once the scheme is finally phased out, having failed to fix Britain’s housing crisis.
But analysts now think there will be so much cash left over for the industry’s biggest players that they could hand out £3.6billion to investors in 2024, a year after the subsidies stop.
The scale of the projected payouts is likely to anger campaigners who argue that money lining the pockets of executives and their shareholders should be spent on building homes.
The largest dividend last year came from scandal-ridden Persimmon, which is this week set to reveal it paid out £748million in 2019 after raking in pre-tax profits of more than £1billion yet again.
Its annual results due on Thursday will show its operating margins are still way above the sector norm at 30 per cent, even after it pledged to spend huge sums to improve the quality of its homes.
Also on Thursday, Vistry, the newly-named firm formed by the merger of Bovis and parts of Galliford Try’s business, is expected to report a £130million dividend for last year.
The results will follow on from Taylor Wimpey, another major builder, which on Wednesday is expected to say it dished out £500million to shareholders in 2019.
‘We are forecasting the nine companies in this report to increase 2024 dividends in aggregate by 40 per cent versus 2019, including special dividends,’ said HSBC analyst John Fraser-Andrews.
‘Our forecasts for these dividend payments to rise are the result of the cash balances that prevail on almost all of the balance sheets of the housebuilders in this report, such that we expect the national volume builders with limited growth prospects within the UK to continue to return almost all of their free cash flow to shareholders.’
Fraser-Andrews and his team have made a ‘U-turn’ in their report and followed others in becoming more optimistic about house prices.
They have now upgraded their forecasts for 2020 in southern England and now expect a 2 per cent uptick, against a fall of between 2.5 and 5 per cent previously.
Builders’ share prices have surged since the Election and some hit all-time highs last week, including Persimmon and Barratt Developments.
Last week, property website Rightmove said asking prices rose again, underlining a return in confidence from those selling their homes.
Keepmoat Homes goes on market at £500m
One of Britain’s oldest builders could be about to change hands as private equity firms and hedge funds look to take advantage of the revival in Britain’s housing market.
City sources said the private equity owners of Keepmoat Homes are looking for a buyer willing to spend £500million.
The Doncaster-based firm, which focuses on affordable homes for first-time buyers, was set up by George Bramall and Dick Ogden in 1931.
TDR and Sun Capital bought the company, which sponsors the stadium used by Doncaster Rovers FC, six years ago.
Another housebuilder for sale is Avant Homes, formerly known as Gladedale. Like Keepmoat it was once owned by failed bank HBOS.
A group of hedge funds bought the Derbyshire firm from Lloyds Bank for £175million four years ago and are said to want to sell it for £600million, with Moelis advising on both sales.
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