Housebuilders raise the roof

ONE of the big political questions of the moment is whether the various government schemes to help the housing market including the ‘affordable housing scheme’ and ‘Help to Buy’ are stimulating new homebuilding. The answer happens to be a resounding yes.

New data from the house building industry body the NHBC show work started on 133,670 new homes in 2013, up 28pc on the previous year and the highest number since 2007 when 200,700 went under construction.

The data would also seem to explode a number of myths. Far from being confined to London and the South East, house building is increasing in every region of England as well as in Wales, Northern Ireland and Scotland. And while it may be harder for younger people to get on the housing ladder than in the past, some 30pc of the new homes were acquired by the 25 to 34-year- old age group, not much less than the 33.9pc in 2008.

Moreover, social housing is gathering momentum and made a ‘sig- nificant contribution’ to the 37pc increase in public sector houses built and registered in 2013.

So where does this leave things for 2014, now that the second part of ‘Help to Buy’ (the much derided mortgage subsidy scheme) is up and running? Almost certainly in rather a good place.

The early data for January 2014 show new registrations rising across the board and the NHBC confidently expects social housing to be a big winner in the first half of the year. Greater London looks particularly strong because Boris, to his credit, appears to have speeded up the planning process.

Labour bangs on about building 200,000 houses a year even though in 2009, the last full year before it left office, the number shrank to just 88,100. Reality is that the market is already heading towards 200,000 a year and the new build is being led by the private house builders.

These are the same companies in Ed Miliband’s sights over their surging share prices and land banks.

Free markets, for all their faults, are already doing the job.

Shelling out

THE decision by Bob Dudley of BP to throw in his lot with Rosneft and the Russians looks sounder by the day. Certainly, oil investment in North America looks to be a bed of nails, for legal, environmental and pricing reasons.

Shell’s new boss Ben van Beurden may feel he deserves a swig of advocaat following his first results presentation, that produced a 2pc uplift in the share price. But that has more to do with the dividend lift than anything strategic.

Whereas BP has a good chance to partner Rosneft in the Russian Arctic and some of the more remote areas of Siberia, Shell looks as if it is stymied on Alaska’s Artic shores.

A combination of weather and challenges by the green lobby have put matters on hold for this year at least, if not forever.

The underlying message from Shell is that the economics of North American exploration have changed. The rapid rise of fracking has sent the price of oil and gas across America southwards. The more difficult-to-get reserves, such as those in Alaska, no longer look that attractive.

So Shell is scrapping a $20bn project to develop a natural gas to diesel project in Louisiana. The Anglo-Dutch group spent $26bn in recent years building the company’s portfolio of shale properties, only to start writing down the value as crude prices tumble.

As for Alaska, the company has written $1bn off the business, generated negative green and media attention and has still to produce a drop. The inexorable rise in production costs together with lower margins produced a sharp profits setback for Shell in the final quarter. If there is any cheer van Beur- den looks to be turning over a new leaf.

He seems ready to jettison expensive capital intensive projects and focus more on income and giving back to shareholders. That must be a good start.

Blue skies

LIBERTY Global and Vodafone are in a battle royal to dominate the European cable space. And BT, with its dominance of UK broadband, has thrown down a challenge to BSkyB in sport and movies.

The reality is that the digitally smart consumer may be less concerned with how the signal is delivered to their devices and TV sets than with the creative content.

Under the guidance of Adam Crozier ITV has invested heavily in production and plans to package some of this up with a pay-tv channel. BSkyB may have suffered a profits setback in the first half of the current year, but it is placing huge effort on new programming in partnership with America’s HBO until 2020.

The increased choice of quality programming will be good for consumers and should, over time, be value enhancing for investors.