Britain's house prices increase every single year because there is a dearth of property available for the rampant rise in demand.
Property prices won't stop rising until this gap closes.
According to the latest trading statement from housebuilder Bovis Homes, this imbalance is helping it absolutely clean up. Prices are rising and sales are shooting higher. That, in turn, is boosting profits massively.
This is what Bovis said in its trading statement (emphasis ours):
We expect to announce a significant increase in revenue and profit before tax driven by a record number of legal completions and a strong increase in average sales price.
The Group delivered 3,934 homes which represents an increase of over 8% compared to the prior year (2014: 3,635). Average sales price increased by 7% to circa £231,000 (2014: £216,600).
Activity in 2016 has been similarly frenzied so far too, signalling that house price rises are unlikely to slowdown anytime soon. Here's Bovis:
The Group has started 2016 with a strong forward sales position with 2,003 total reservations, an increase of 14% over the prior year's 1,752 forward reservations.
Current housing market conditions together with our improved forward sales position and anticipated growth in average sales outlets support our expectation of continued growth. The profile of our anticipated sales outlet launches means that legal completions in 2016 will be weighted to the second half in a similar manner to 2015.
Bovis builds its houses in "the higher growth housing markets in the south of the UK with limited exposure to the more volatile London market," according to analyst Anthony Codling and his team at Jeffries. That means it's in a great position to ride the rising house price wave without getting wiped out.
Codling and his team say in a note this morning (emphasis ours): "Bovis is one of the few growth stocks in the UK-listed housebuilding sector; we estimate that volumes will grow by c.25% and PBT by around 65% in the three years ending 2017."
Jefferies' forecasts underline the fact that, like it or not, house prices are going up.
Bovis Homes is the latest in a long line of British housebuilders that are making a killing out of the home shortage. Earlier this week Taylor Wimpey told investors 2015 was a bumper year thanks to rising prices and huge demand.
Average selling prices on private completions by Taylor Wimpey increased by 9% to £254,000. Total home completions increased by 7% to 13,341.