Signs of life appear to be returning to the house building sector after a torrid 18 months of job losses, insolvencies and crippling debts.
Major house builders have continued to talk of encouraging signs over the past fortnight, with visitor numbers and sales ahead of expectations.
Persimmon has agreed a £1.1 billion refinancing deal with its banks, Berkeley is amassing a £300 million war chest, and takeover talk has surfaced at Redrow after founder Steve Morgan upped his stake.
And in another sign of optimism about the sector, ‘shortsellers’ have reduced their bets on house builders’ shares going down, according to data from stock lending experts dataexplorers.com.
Short sellers bet on share prices falling by selling shares they have borrowed from big investors, and buying them back later.
In August 2008, 15 per cent of Taylor Wimpey shares were on loan compared to less than 4 per cent now. Barratt had 18 per cent on loan in August 2008, compared to 10 per cent now.
The level of short interest in Persimmon has fallen sharply in the last three months to nearly half that of November 2008 - from 22 per cent to just under 12 per cent.
Persimmon’s recovery comes despite the York-based house builder crashing to a loss of £780 million for 2008 after impairments totalling £905 million.
It has cut its workforce from 5,100 in the summer of 2007 to 2,300 now, but this week agreed a new £1.1 billion refinancing deal until 2011.
Analysts are now looking favourably at Persimmon. Numis said the firm was the “most attractive house builder”, while Cazenove said it was “strongest placed to weather the storm”.
Persimmon finance director Mike Killoran told Construction News: “We all came back after Christmas expecting more torrid times, but the fact we have had a little seasonal up kick makes us all feel better.”
Barratt, Galliford Try and Redrow have also all highlighted a good start to 2009. Meanwhile Berkeley Group announced it was raising £50 million to bolster its land acquisitions war chest to £300 million.
And Redrow founder Steve Morgan has made a bid to return to the board after upping his stake in the house builder to 29.9 per cent, including contracts for difference.
The stake increase has prompted takeover talk, with Mr Morgan now just below the 30 per cent threshold which would require him to launch a full bid for the company under stock market rules.
Shares in Redrow increased by more than 15 per cent immediately after news of Mr Morgan’s stock purchase.
But house builders are being careful not to get carried away. A source at one major house builder said: “No one is calling the bottom of the market yet. A lot of the smaller players will continue to go under at regular intervals.”