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By Tom Winnifrith | Thursday 11 October 2018
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
I never had Roger Lawson of Sharesoc down as a natural wit but I did chuckle when I read his comments on Telford Homes (TEF) and London/UK house prices. He is bang on the money, echoing exactly what I said in bearcast yesterday. Anyhow back to Roger “it’s the way he tell’s ‘em”
Another announcement this morning was from Telford Homes. They are a housebuilder mainly focused on “lower cost” homes in East London. They have also moved into the “build to rent” sector as houses have become unaffordable to buy for many people in London.
I put “lower cost” in quotes because if you read the announcement their definition of “affordable” is houses that cost £540,000 on average. But they do admit that they still have to shift 25 homes priced at over £600,000. Just to explain how mad the house price market is in London, a simple calculation of affordability will suffice. I always used to think that a mortgage to income multiple of 3 was reasonable, although it seems some companies are offering 4 or 5 times now after taking into account the current low interest rates. But even on a multiple of 4, that means a first-time buyer with little deposit has to have an income of over £130,000 per annum to buy their “average affordable” home.
And what do you get for your money? The announcement mentions their new development at Gallions Point. A quick look at a map tells you that appears to be between the flightpath of City Airport and Beckton sewage works in East London. It’s not even a short cycle ride to the City Canary Wharf from there. You’ll no doubt get an apartment with a good view of the Thames though.
House prices have been mad in London for a very long time and that might continue to be so. Certainly Telford Homes depends on it. The company still expects to increase first half profits over the previous first half and are proposing to increase the dividend.
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