Property price hikes could see dividends double
Dividend payments by U.K. homebuilders will nearly double in size this year, according to financial information provider Markit, as an increasingly buoyant housing market feeds through into better returns for shareholders.
Markit forecasted dividend payments for FTSE350 homebuilders will hit £285 million ($443 million), up from £150 million in 2012, with Barratt and Redrow due to resume dividend payments, and Bellway, Bovis Homes and Berkeley Group expected to boost payouts.
(Read more: UK investors retreating to property, once again)
"Payout dividends are something they (homebuilders) are doing in great size," said William Duff Gordon, research director at Markit.
"They would not be the only companies using their cash pile to pay out right now. It is a conventional view that you either do a share buyback or you a do a dividend hike if you are doing well."
He added that homebuilders could also be seeking to reward shareholders for being "quite patient".
"Their shares have risen a lot, but that has been quite recently and they were obviously quite badly hit during the credit crisis," Duff Gordon said.
Shares in U.K. homebuilders have rallied strongly over the past 12 months, boosted by the announcement of the controversial "Help to Buy" schemes, and by economic data suggesting an improvement in the U.K. economy. Bellway shares are now up 31.9 percent on the year, and Barratt and Bovis shares are up respectively 50.3 percent and 33.0 percent.
In March, Chancellor of the Exchequer George Osborne launched a £5.4 billion package to boost the housing market, which included the "Help to Buy" schemes, aimed at helping citizens purchase property. These schemes include offering government loans of up to £120,000 towards deposits on homes worth less than, or equal to, £600,000. Potential buyers will only need to raise a deposit of 5 percent of the purchasing price.
In addition, the government will launch a mortgage indemnity scheme, compensating mortgage lenders for up to 80 percent of the purchase value of a property, in the event of repossession.
Duff Gordon said the launch of the "Help to buy" schemes had propelled both house price inflation and demand for homes, fueling expectations of improved free cash-flow, and a return to net cash positions.
"We are seeing some of Osborne's efforts to get people on to the property ladder paying off and I hope that continues," he said.
According to LSL Property Services, house prices in England and Wales hit an all-time record high in July, beating a previous peak in 2008, before the crisis. House prices were up £5,796 on the past twelve months, averaging £232,969.
(Read more: Recovering UK economy shows broader, faster growth)
"House prices have never been higher. 2013 has marked the time when the property market recovered from the 2008 financial crisis… the improvement is more than just a seasonal trend. The market is palpably stronger than a year ago and confidence is returning to lenders and buyers," said David Newnes, the director of LSL Property Services, in a report.
In addition, Hometrack reported on Monday that house prices rose a further 0.4 percent in August, despite the traditional summer slowdown. According to the report, demand for housing in London has grown by 15 percent over the last six months, while supply has fallen by 0.6 percent.
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