Help to Buy scheme expected to boost DIY sales

Britain’s biggest sellers of plumbing, paving stones and pipes are tipped to benefit from a surge in home improvements as a result of the decision to start the second phase of the government’s controversial Help to Buy mortgage scheme on Monday.

DIY retailers and builders' merchants were hammered during the recession with shares and profits plummeting. But the industry is hoping that the extension of the government-backed mortgage scheme – from purchasers of new properties to buyers of second-hand properties worth less than £600,000 – should lead to a revival in fortunes that mirrors the resurgence experienced by their counterparts in the US.

Neil Saunders, managing director of Conlumino, a retail research agency, says the builders’ merchants will pick up faster than the DIY retailers – a point that was emphasised by Carpetright’s profit warning on Friday.

He points to a long-term decline in DIY as a result of the increasing complexity of home electricals and plumbing, as well as the failure of the postwar generation to pass down essential skills to their children. Falling prices for kitchens and bathrooms have also contributed, he says, making it more affordable for time-poor workers to hire builders.

Conlumino predicts that Help to Buy will deliver the first increase since 2007 in DIY sales, including gardening, next year. Revenues are expected to rise from £12bn this year to £13bn in 2014. “Help to Buy will help stimulate transactions because people are more likely to do things if they are moving house,” he says.

Geoff Cooper, chief executive of Travis Perkins, says both its DIY and Wickes building materials business should gain sharply, with turnover rising 10 per cent next year. “Our DIY businesses will benefit as well as our trade because small tradesmen go anywhere – they may go to a Wickes or a Travis Perkins,” he says.

He points to an increase in the number of people moving house from about 75,000 to 85,000 in July and August compared with the same period last year. Although no one expects levels to return to the precession peak of 155,000 a month, Help to Buy should help it return to its long-run trend of about 120,000 next year, he says.

“Help to Buy part two is a really useful way to get back that,” he says. He adds that there’s a nine-month lag between housing transactions and home repairs so the full benefit for Travis will only come through in 2014. “By the time you’ve moved in, got rid of the boxes and decided to knock a wall out, it takes six to nine months,” he says.

The upturn in house sales, whether for new or second hand properties, is also good news for the horticultural sector.

The garden industry supplies the landscaping and plants that are an important part of finishing off new developments and presenting them as attractive locations.

Even new homeowners in second hand properties tend to spend on their gardens.

Builders have already been loading their trucks with bricks and plasterboard as they gained from a boom in construction as a result of the first stage of Help to Buy, which applied only to new-build properties.

But Charlie Campbell, analyst at Liberum Securities, the investment bank, estimates that the second stage of Help to Buy will cause a further 15 per cent jump in housing transactions which will boost the builders’ merchants, such as Travis, Grafton, SIG, Howden and Wolseley. Although their shares are up 50 per cent over the past 12 months, they are still 20 per cent below the highs of 2007.

Despite the optimism that the increase in housing transactions will be matched with an upturn in sales, most analysts agree that the builders’ merchants such as Travis Perkins are better geared to benefit from the rise in approvals than the pure DIY retailers.

Source : Gill Plimmer - Financial Times
www.ft.com