Housebuilders and the City must share the blame for their unhappy relationship. To even the most forgiving analyst, the word housebuilder immediately brings to mind phrases like "cyclical market" and "wholesale write-downs". These firms may have had growing returns for nine years, but history tells the moneymen that the game will soon be up. Even some housebuilders admit privately that, over 20 years, their aggregated profits are close to zero. In that case, one might reasonably question why they went public in the first place.
That said, the City is culpable in failing to appreciate the underlying strength of many companies. It's true that as a mature sector, it might be hard to identify opportunities for exponential profit growth. And of course land is in short supply, the planning system is impregnable and the planning green paper promises development tariffs and quotas of affordable homes. All of which will chip away at margins. But the weakness of housebuilders' position is also a strength. With demand for new homes hopelessly outstripping supply, the resultant inflation (particularly in the South-east) is feeding straight through to their bottom line. And with the continuing taboo on green-belt development, they will be enjoying near monopolies for years to come.
None of this is likely to sway the hard-boiled analysts in the Square Mile, of course. Even those, like Leslie Kent of stockbroker Seymour Pierce, who can see a case for rerating housebuilders, don't think it will happen soon. So what can the quoted firms do? Well, they could follow Cala, Fairview and Linden and walk away. But the cost of buying back the business may be prohibitive for larger companies, who would simply replace one cold-hearted partner (the City) for another (the banks).
Consolidation may be another route to salvation. And it's certainly something that the City has been pressing the leading players to consider. A premier league of super-housebuilders, producing 20,000 new homes a year, may be large enough to attract investors, and have the economies of scale to make the kind of improvements in customer care and construction quality that will be needed to underpin further profit growth. In the present climate, though, the City may simply conclude that these behemoths are creating as many problems as they solve. Could they really find enough land to sustain that build programme, particularly around London? It will be interesting to track the fortunes of Peter Johnson's Wimpey.
In the end, housebuilders may be resigned to a Micawberish strategy of hoping for something to turn up. And it just might. Property companies have been back in favour since the dotcom crash, so why not those other purveyors of bricks and mortar? Berkeley is certainly a better bet than BT right now. And, in the wake of the ITV Digital dispute, is your money safer in Carlton or Crest Nicholson? What goes around may one day come around for housebuilders.