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Countryside Residential Homes Builder IPO ,Construction , house prices,housing crisis all mashed up

Countryside, the British house builder [not to be confused with countrywide PLC estate agents] is preparing for a public listing, having appointed bankers to advise on a potential sale after receiving at least two uninvited takeover bids.

The almost 60 year old company [founded 1958], which is majority-owned by the US private equity house Oaktree Capital, who have been planning an IPO of shares , as early as 2016 in London. Though persons familiar with its plans have said it is also exploring a possible sale.

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While an IPO remains the first option, the company “wants to be sure about the right path to follow” according to people familiar with the deal,  having appointed Rothschild as  advisor to its board and Oaktree on offers.

Countryside having previously selected JPMorgan, Numis and Barclays as bookrunners ahead of a potential IPO that could value its business at £1bn. It is now forecast to give more information on its plans when it issues full-year results later this month.

Half-yearly results for the house builder ,reported an 85 per cent increase in profits, to £37.2m, as it sets out a plans to double yearly output to 4,000 units by  the end of 2020.

Oaktree bought its majority stake in countryside a couple of years ago from Lloyds Banking Group, who had taken over the company in a refinancing deal at the trough of the financial crisis in 2009. Countryside management still retain a portion of the company.

In 2014 Oaktree acquired luxury home developer Millgate and merged it with Countryside, planning to double the company's size. Following this, the company rebranded as Countryside rather than Countryside Properties, adopting the slogan ‘Places People Love’.

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In 2015, Countryside announced further changes to its Board of Directors. David Howell, previously a non-executive director, became Chairman, whilst Ian Sutcliffe [When Oaktree invested, it appointed former energy and petrochemicals executive Sutcliffe initially as chairman] who now assumes the role of Group Chief Executive Officer.] Graham Cherry became CEO New Homes and Communities, whilst Richard Cherry became CEO Partnerships

Over the past couple of years, the company has bounced back as house prices have increased quickly in its key London domains and the surrounding commuter belt, and the government’s Help to Buy scheme has encouraged sales of new properties.

The announcement of Countryside’s IPO  arrives as McCarthy and Stone, the country’s larger builder of homes for  retirees , was valued at £967m after its own IPO was brought back to the London market after nine years. Its shares were up 13.5 per cent in conditional trading last Friday.

A housing famine in the UK has pushed up the share prices of housebuilders by almost 60 per cent in the last two years.

Though their shares oscillated last week after an authoritative analyst at Liberum downgraded Barratt, Persimmon and Taylor Wimpey to “sell” ratings, contending that UK house price inflation a ,would not be able to keep pace, with the increasing costs of construction [see report below].

Many have decided to move out of capital, with increasing rents coupled with lack of housing stock, relocating to other cities in the uk .With cities like Birmingham offering, more favourable conditions for living and business start ups. 

House prices grew nationally by 9.7pc during the quarter to October, compared with the same a year ago, we learnt last week, with the latest Halifax survey showing the strongest annual increase recorded so far this year.

This boost reflected “growing housing demand, fuelled by improving economic conditions” but also “an imbalance of demand and supply” as stated by Royal Institute of Chartered Surveyors last month.

Over sixty percent, according to the Halifax, thinks prices will keep rising over the next 12 months. Again, that’s fine for those with property but, unless post-tax wages surge, further rises make home-ownership even harder for those without.

Moody’s also think house prices will keep heading upward. The projected increase in the UK population to 70M by the end of this decade, said the ratings agency in a report last week, coupled with ongoing low unemployment, will keep prices rising.

Though [they] have outlined that UK population growth will support housing demand and property prices."In our view, the rising population in these countries combined with a housing supply shortage and robust economic growth will support house prices and therefore help reduce losses on residential mortgage loans," says Gaby Trinkaus, an Assistant Vice President - Analyst at Moody's.

This was a view echoed by property consultant JLL in another report [see below]. Across the London and the South East, prices will go up at least 24pc over the next five years, the study said, with real estate also performing well in Manchester, Leeds, Edinburgh and Bristol.

The upside is with the government recently launching initiatives, such as help to buy boosting home ownership , the historic housing and planning bill and the National Infrastructure Commission to get Britain building.Things will get better but it will take time, with an economy in a momentary undercurrent . The race is on for house builders to find more inventive and cost effective ways to bridge the housing gap. The recent creative forsyth by the government of using old inner city Victorian prisons, to free up living space , is a welcome start