Contrasting housing markets in UK and US, says Markit
23 February 2015 London
Image: Shutterstock
Homebuilder's returns in the UK are seemingly on the up with increased dividend payments, marking a contrast to the US housing market where short sellers are congregating, according to Markit.
As concerns of a sharp UK housing market slowdown abate, homebuilders’ shares have performed well over the past 30 days. UK homebuilders have averaged a 12 percent return, with firms such as Bellway and Redrow edging up by 11 percent and 34 percent respectively.
Analyst at Markit, Relte Schutte, commented: “Using the average shares out on loan across the largest homebuilders in the UK to gauge sentiment reveals that short sellers covered positions in the second half of 2014. Average shares outstanding on loan peaked in June 2014 at 1.2 percent, declining by 75 percent to hit 0.5 percent at present.”
US homebuilders are seeing 15 times more short interest than their UK counterparts, racking up an average of 7.8 percent.
Despite this, the US market has seen short sellers cover slightly from a high of 8.7 percent reached in October 2014. Currently the most short-sold homebuilder in the US is Kb home with 17.4 percent of shares out on loan.
According to Markit’s dividend forecasting, distributions to shareholders among homebuilders in the FTSE 350 are expected to increase by 50 percent this financial year reaching £1.3 billion, with ordinary payments up 25 percent to £668 million and expected special distributions totalling £642 million.
Dividend growth is expected to slow following the significant jump in payouts in 2014.
Barratt Developments, Berkeley Group Holding, Persimmon and Taylor Wimpey represents 80 percent of the payout of the sector (around 20 percent each).
Taylor Wimpey is expected to increase its payout by 280 percent due to a commitment from the management to pay £250 million in July 2015 and £200 million thereafter.
In comparison, dividends for US homebuilders such as Kb Home and Lennar are expected to remain constant, while Toll Brothers lack of dividend program is also expected to continue.
Schutte continued: “Despite strong rallies in both housing markets, historical returns highlight differences in investment outcomes.”
“The average returns across the largest UK homebuilders in 2013 and 2014 were 51 percent and 12 percent respectively, while the largest US homebuilders delivered on average a negative return in 2013 of -2.1 percent and 3.3 percent in 2014.”
As concerns of a sharp UK housing market slowdown abate, homebuilders’ shares have performed well over the past 30 days. UK homebuilders have averaged a 12 percent return, with firms such as Bellway and Redrow edging up by 11 percent and 34 percent respectively.
Analyst at Markit, Relte Schutte, commented: “Using the average shares out on loan across the largest homebuilders in the UK to gauge sentiment reveals that short sellers covered positions in the second half of 2014. Average shares outstanding on loan peaked in June 2014 at 1.2 percent, declining by 75 percent to hit 0.5 percent at present.”
US homebuilders are seeing 15 times more short interest than their UK counterparts, racking up an average of 7.8 percent.
Despite this, the US market has seen short sellers cover slightly from a high of 8.7 percent reached in October 2014. Currently the most short-sold homebuilder in the US is Kb home with 17.4 percent of shares out on loan.
According to Markit’s dividend forecasting, distributions to shareholders among homebuilders in the FTSE 350 are expected to increase by 50 percent this financial year reaching £1.3 billion, with ordinary payments up 25 percent to £668 million and expected special distributions totalling £642 million.
Dividend growth is expected to slow following the significant jump in payouts in 2014.
Barratt Developments, Berkeley Group Holding, Persimmon and Taylor Wimpey represents 80 percent of the payout of the sector (around 20 percent each).
Taylor Wimpey is expected to increase its payout by 280 percent due to a commitment from the management to pay £250 million in July 2015 and £200 million thereafter.
In comparison, dividends for US homebuilders such as Kb Home and Lennar are expected to remain constant, while Toll Brothers lack of dividend program is also expected to continue.
Schutte continued: “Despite strong rallies in both housing markets, historical returns highlight differences in investment outcomes.”
“The average returns across the largest UK homebuilders in 2013 and 2014 were 51 percent and 12 percent respectively, while the largest US homebuilders delivered on average a negative return in 2013 of -2.1 percent and 3.3 percent in 2014.”
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