City sources believe that housebuilders' focus on mixed-use schemes could make acquisitions inevitable.
Stephen Rawlinson, an analyst at Arbuthnot, said: "There is a stronger affinity now between the housebuilding and property sectors, because of the prevalence of mixed-use schemes."
Leslie Kent, a housebuilding analyst with JM Finn, added: "Housebuilders are very much more commercially orientated today. On the ground floor of a tower block, there is always going to be an All Bar One, a Tesco Metro or a Boots."
Another City source pointed to property tycoon Gerald Ronson's build-up of an 11.2% stake in Crest Nicholson last year as an example of this trend.
In the past, housebuilders have merged with contractors, but this trend has slackened following disappointing results.
Other City sources predicted a tough year for housebuilders. Bridgewell analyst Chris Millington said that house price inflation could be close to zero by the end of 2004, with only firms boasting unique selling points, such as a focus on regeneration or strong land banks, likely to perform well. He added: "This year will be characterised by big winners and big losers."
Alistair Stewart, an analyst at Dresdner Kleinwort Wasserstein, also warned that the results of the review of the housing market by economist Kate Barker this spring might not make comforting reading for housebuilders. If she were to recommend introducing VAT on new-build housing, housebuilders would be unable to pass on much of the extra cost to consumers, as they would then turn to the cheaper second-hand market.
Support services groups and contractors should be in for another strong year because of the government's continued public expenditure programme.
Some analysts added a word of caution, though. KBC Peel Hunt's Mike Foster warned firms exposed to public expenditure by 2005 might not get investor backing. He said: "Government spending will support 2004 massively, but there is a bit of a question mark over '05 and '06 because the private sector will probably make a comeback."
What the future holds: Analysts’ tips for 2004Building asked City tipsters to have a punt on the possible deals of 2004:
- “Berkeley could go in for Fairview. Tony Pidgley [Berkeley chairman] recently announced it could make an acquisition – it likes London, but is only exposed to the faltering high-end market. Fairview would give Berkeley entry into the lower end.”
- “Property tycoon Gerald Ronson has not built up an 11.2% stake in Crest Nicholson by accident – he signs the cheques. He might make a move for the company.”
- “Looking at the contractors, there are quite a few with market capitalisations of £200m to £300m, which is too low for investors to be that interested in them. Perhaps an Interserve could merge with a Mowlem?”