Foxtons Pain, Bovis Gain Shows U.K.'s Two-Tier House Market

(Bloomberg) -- U.K. home builders’ results this week underscored the nation’s increasingly divided housing market, with resilience outside the capital contrasting with London’s sluggishness.

Bovis Homes Group Plc reported record profits Thursday, following upbeat announcements from Persimmon Plc and Taylor Wimpey Plc. All of these companies operate nationwide. London-focused Telford Homes Plc and broker Foxtons Group Plc by contrast are pinning their hopes on rentals as the capital’s torrid housing market shows little sign of improving.

Key Insights

  • The government’s Help to Buy program is particularly helping demand outside London, even against the backdrop of Brexit.
  • Telford now expects profits before tax for 2020 to be significantly lower than 2019 amid a slower sales market in the U.K. capital, where customers expect more incentives and discounts.
  • As a result, it’s stepping up plans to build homes for the rental market, which will now account for more than half of its development pipeline by the end of this year and more in future.
  • Bovis, which sells most of its homes outside the U.K. capital, grew profits before tax by 47 percent after improvements to customer care and build quality.

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  • The London slowdown was underlined by broker Foxtons, which saw revenue from sales fall 15 percent, partially offset by a 1 percent increase in rental earnings.
  • The company, which slipped to a 17.2 million-pound ($22.9 million) pre-tax loss, sees little sign of improvement in the short to medium term and won’t pay a dividend.

Market Reaction

  • Telford dropped as much as 18 percent in early London trading, the most since the Brexit referendum result in 2016.

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