Focus on Ibstock: With stamp duty clock ticking, house prices soar again

Summary

• British home buyers seemed to be in a rush to beat the stamp duty holiday deadline
• Ibstock experienced a surge in demand for its products during Q3 2020

The house prices soared by 3 per cent in September as against the same month during the previous year as the stamp duty holiday exemption limit came nearer. Pent up demand also contributed to the rise in home prices in the UK. The stamp duty holiday deadline falls on 31 March 2020.

This information was a part of the latest house price index report from Zoopla, the nation-wide home and commercial property website for the UK. Zoopla informed that this was the sharpest growth witnessed in more than two years.

On the other hand, the volume of activity was up by an even higher proportion, mentioned the Zoopla report. More than 0.4 million homes were under sale in September, which was a 50 per cent rise in volumes as compared to the same period in 2019.

Some experts argued that the government housing support schemes have worked well for the sector’s growth, despite the challenges posed by the pandemic.

The pandemic also forced people to stay indoors and work from home. This led to fresh demand to move to bigger homes in sub-urbs from many buyers and made the housing market a bright spot of the economy.                                                                                                         

Sales volumes were expected to remain high for Q4 2020 and would continue to be sustained into Q1 2021 as well, according to Richard Donnell, research and insight director, Zoopla. The impact would be visible in both owned and lent-out properties, according to housing experts.

House prices increased by 2.6 per cent in London for the month of September 2020. Experts also argued that once the stamp duty holiday expires, the house price rise might just dry up. Stamp duty changes are known to distort the housing market volumes to a certain extent, they explained.

The experienced property portal pointed out that going forward, market players need to be cautious that merely half of the home sales agreed in January could translate into complete sales by 31 March 2020. The legal processes etc. are time consuming, it informed.

With rising demand, more housing supply also came forward. For instance, the housing supply availability rose by close to 40 per cent in September 2020 as compared to September 2019.

However, Zoopla pointed out that the buyer reaction was different based on their income profiles for September to October period. While housing sales dropped by 18 per cent for the poorest section of society in the UK during the mentioned 2 months as against the five-year average, the sales for the richest section of the nation’s population rose by 19 per cent as a contrast. 

The construction market suppliers like clay makers also benefitted from the ongoing housing market boom. One such company was Ibstock, whose clay and concrete segment gained significantly during the three months ending 30 September 2020.

Ibstock's latest financials

In terms of volumes sold, Ibstock was the top-most British manufacturer of bricks. The brick manufacturer reported a continued surge in demand for its products during Q3 2020. The company had informed that its trading conditions improved during the three-month period.

The upsurge was led by new home construction along with repair & maintenance operations.

The group was able to generate an overall volume of around 90 per cent of its previous year’s levels for the July to September 2020 quarter.

While Joe Hudson, CEO, Ibstock was happy about the results, he maintained a cautious approach given the future uncertainties in the British housing market.

The company had taken strategic decisions to contain cost and manage its capacity during the quarter which improved the recovery margins across its business segments, informed Ibstock.

Further, the company recently went in for an industry collaboration to reach net zero emissions by the British concrete and cement industry by the year 2050.

In the mid-term, the company planned to attain 15 per cent reduction in its carbon emissions by the year 2025. It was exploring newer methods of concrete production in this regard. It had also introduced SustainCem, a low-carbon roof tile of concrete in collaboration with Lafarge. The company was proactive in seeking its sustainability targets soon, according to Will Hicks, its operations director.

Also Read: Performance Review of Two Stocks Trending on the LSE: GlaxoSmithKline Plc & Ibstock Plc

Also Read: UK Housing Companies To Face CMA Action Over Leasehold Malpractices

Stock performance

The company stock (LON:IBST) was trading at a value of GBX 163.10 on 29 October 2020 at 3.01 PM, up 0.06 per cent from its previous day’s close. The stock’s high for the year 2020 was attained 20 February at GBX 322.22 points, after which it dropped to a low of GBX 146.90 with mounting fears of a national lockdown. Since then, the stock has been oscillating up and down. Its market capitalisation was observed to be £667.58 million.