Property boom boosts Wimpey

HOUSING markets in the UK and the US are expected to remain in good shape, according to housebuilder George Wimpey.

The company reported that more than half projected sales for the year have been completed or reserved within the first 13 weeks. Volume of sales were up 4% on a year ago and revenue was 14% ahead. In the US, its Morrisons Homes company reached 60% of its annual sales target within the first quarter.

Shares in Wimpey had risen 1/2p to 405 1/2p by mid-morning.

'Healthy market conditions in both the UK and the US are expected to continue and our businesses are well placed to take advantage of them,‘ Wimpey said in a trading update.

'The strong sales performance to date, along with actions taken to sustain margins and control costs will ensure George Wimpey continues to achieve further progress in 2004,' it added.

The value of the average UK home has doubled to £142,000 in the past five years, according to figures from lender Nationwide – a result of low interest rates, high employment and a shortage of homes.

The boom has feed through to fast-growing profits for housebuilders, with shares in the sector enjoying a rally. Shares in Wimpey, which saw profits soar 32% to £378m in 2003, have nearly trebled in value in the past five years compared with a 25% fall in the FTSE 100.

A plethora of top fund managers have been buying shares in the sector recently, pointing out that despite the rally, housebuilder stocks remain cheap when compared to their earnings' growth.

Ted Scott, a fund manager at ISIS, has blamed the share price discount on investors' expectations of a 'doomsday scenario' for the housing market. However, Halifax today reported acceleration in UK house price increases, with a rise of 2.2% in March, taking annual inflation to 18.5%. The year-on-year rise compares with 17.8% in February, 16% in January and 15.4% in December.