Wolseley Plc led U.K. housing-related stocks higher in London trading on speculation the U.S. government takeover of lenders Fannie Mae and Freddie Mac will shore up the mortgage market and increase the availability of loans.
Wolseley, the world's biggest distributor of plumbing and heating gear, rose 11 percent, while Barratt Developments Plc and Taylor Wimpey Plc had the biggest gains among house builders.
Britain's 19 billion-pound ($33.4 billion) homebuilding industry is suffering as lenders rein in mortgage offers, starving potential homebuyers of funds, after banks and securities firms announced $500 billion of losses and writedowns related to a collapse in the U.S. subprime mortgage market. Yesterday's takeover of Fannie and Freddie, which account for almost half the U.S. home-loan market, makes it more likely European banks will begin to increase lending to buyers, KBC Peel Hunt analyst Robin Hardy said.
``Confidence levels in the U.K. housing sector stocks are likely to improve on this news,'' Hardy said today in a note. Combined with signs the cost of mortgages was beginning to fall over the past two weeks, ``the U.K. mortgage market is beginning to look a little less sick,'' Hardy said. ``The level of mortgage issuance in the U.K. could take a first faltering step towards recovery.''
Stocks gained in the U.S., Europe and Asia after U.S. Treasury Secretary Henry Paulson said yesterday the government will provide short-term funding to the two biggest U.S. mortgage finance companies and purchase debt backed by home loans. The biggest surge in mortgage defaults in at least three decades had threatened to bring both lenders down.
Wolseley advanced 47 pence to close at 485 pence. Royal Bank of Scotland Group Plc analysts including London-based John Messenger raised their share price estimate on Wolseley to 298 pence from 263 pence in a note to clients today.
Taylor Wimpey, the U.K.'s biggest homebuilder, rose 11 percent, and Barratt, the No. 2, climbed 13 percent. Goldman Sachs Group Inc. analysts including Eshan Toorabally raised their price estimates for European construction companies, including U.K. homebuilders, in a note to clients today to reflect the increased likelihood of mergers and acquisitions in the industry.
Other housing-related stocks gained. Irish suppliers of building materials CRH Plc rose 9.8 percent and Grafton Group Plc 5.7 percent. CRH, the world's second-biggest maker and distributor of construction materials, and Wolseley both get about half of their sales from North America.
U.K. commercial property stocks also rose, with the FTSE 350 Real Estate Index advancing 4.7 percent. Leading the gains was Mapeley Ltd. and Quintain Estates & Development Plc. Among other real estate stock gains, Land Securities Group Plc, British Land Co. Plc and Liberty International Plc benefited.
U.K. mortgage approvals dropped to the lowest since at least 1999 in July, the Bank of England said last week, while house prices dropped 12.7 percent in August from a year earlier, the most since at least 1983, HBOS Plc said.