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Property: SRI - Making a move for thr long-term
The noughties have been a tumultuous decade for UK housebuilders, beginning with a long boom which peaked in late 2007, followed by a near collapse of many of the major players in 2008.
There are nearly 700,000 empty homes in England, with the vast majority being privately owned. The government has to adopt measures to bring these properties back into use as part of the strategy to mitigate the current housing crisis. These measures will involve the expertise of building maintenance companies who can provide a one-stop shop service.
The affordable and social housing sector offers defensive growth, with long-term cash flow visibility, all of which is underwritten via central government spending. The market within social housing is estimated to be worth around £11bn annually.
The fragmented nature of the sector, with no single company having a market share over 3 per cent coupled with the very long-term contracts support the case for long-term investing.
The larger, well-established companies such as Mears and Connaught have robust balance sheets, with low debt levels which are amply serviced by revenues derived in the main from the UK government’s coffers. The end result is a sector that offers clear visibility in earnings growth and profitability late into the current decade.
Ketan Patel is a socially responsible investment analyst at Ecclesiastical
