LONDON (Reuters) - Britain’s housing market will avoid a price bubble resulting from the government’s latest ‘Help to Buy’ scheme, because supply will catch up with demand, says the head of Travis Perkins, the UK’s biggest building materials supplier.
“As long as there’s people wanting to sell and move as well as buy and move then the market is helped to be in equilibrium,” Travis Perkins’s chief executive Geoff Cooper told Reuters on Friday.
He reckons new house builds in Britain will be just over 100,000 in 2013, up about 20 percent, while total housing transactions will be about 1 million.
“With that expansion of supply coming into the market I think that’s another important check on house prices running away with themselves,” he said in an interview at the firm’s depot in Vauxhall, south London.
He noted that Britain was coming from a very low base in terms of housing activity, with the majority of people who buy a house not looking to buy a new house, but looking to buy an existing house in a chain of housing transactions.
Some senior politicians including business minister Vince Cable and lenders such as Antonio Horta-Osorio, chief executive of Lloyds Bank, have expressed concerns that the coalition government’s “Help to Buy” mortgage guarantee scheme could inflate house prices.
But the Bank of England’s deputy governor Charlie Bean said on Tuesday the government could raise the fees charged to mortgage lenders if Help to Buy pushes up house prices rather than increasing supply.
“It’s a good thing that a degree of independence has been brought to bear on the Help to Buy schemes by giving the regulatory authorities the power to adjust them if it looks like the housing market’s getting out of control,” said Cooper.
He predicted a situation where the housing market returned to health and the requirement for Help to Buy reduced, enabling the scheme’s cap on properties at 600,000 pounds ($970,000) to be reduced and the programme focused outside of London and on parts of the country where help was needed most.
Last week Travis Perkins, which also trades as Wickes, City Plumbing, Keyline, Tile Giant and BSS, posted an 8.6 percent rise in third-quarter revenue, helped by an increase in construction activity, and said it was on track to meet analysts’ profit forecasts for 2013.
On Friday Cooper forecast year-on-year volume growth for the building materials trade market in 2014 of 2 to 3 percent and growth of 1 to 2 percent for the consumer, ‘do-it-yourself’ market.
With energy prices rising he sees a major opportunity for Travis Perkins to provide materials for more energy efficient and environmentally higher performing buildings and said he was disappointed by Prime Minister David Cameron’s proposal this week to roll back on so-called ‘green’ levies on energy bills.
“Long term I think it’s going to be a great market. In the short term you’re always going to have governments waxing and waning on what they can afford or what they think is politically expedient,” he said.
In his role since 2005, Cooper will step down from the top job on January 1 and as a director on March 6, and will be replaced by John Carter, the current deputy chief executive.
Carter is due to present an update on the firm’s strategy in December.
Shares in the company, which joined the FTSE 100 index in June, are up 67 percent over the last year. They were down 0.7 percent at 1,801 pence on Friday, valuing the business at 4.4 billion pounds.
(This story was refiled to correct figure in final paragraph as 4.4 billion instead of 474 billion)
Editing by Greg Mahlich