The share price of low-cost housebuilder and strategic land specialist M J Gleeson PLC (LON:GLE) (GLE.L) has risen by 3% today. It released a trading update which confirmed that it has seen strong demand for its homes. This has supported both increased build activity on existing sites, as well as the opening of new sites across its target geographic areas.
The company completed the sale of 691 units during the first half of the year. This was an increase of 16.5% on the same period of the previous year, when 593 unit completions were recorded by the company.
The company’s two pilot offices in Penrith and Ashington recently became fully-staffed area offices. Its target market remains strong, with the company not reporting any sign of caution among consumers.
Gleeson Strategic Land sold three sites, which is the same number as in the first half of the previous year. However, the three sites sold in the current year were larger sites and are expected to mean that the division’s half-year results are considerably higher than those of the comparable period.
In my view, the prospects for housebuilders continue to be uncertain. Investors appear to be adopting a cautious stance towards the sector, and this could continue as the Brexit process moves ahead. It would not surprise me if investors demand a larger margin of safety for a variety of operators in the sector, with weak consumer confidence potentially meaning that demand for housing declines.
However, with M J Gleeson appearing to enjoy robust demand according to today’s update, I feel that there could be recovery potential on offer after a disappointing year. The company appears to have a sound strategy to my mind, and a fundamental shortage of new homes may mean that the company and the wider sector enjoys a tailwind over the long run.