And then three came along at once

After years of moans that the booming housebuilding sector was ignored and unloved by the City, suddenly there are three housebuilders in the FTSE-100 – well, the third will come along if the £5bn Taylor Wimpey deal comes off.

The likes of former Redrow boss Paul Pedley have been proved right, arguing that once one of the big boys broke into the FTSE-100, so they would soon be joined by the other majors. The catalyst was Persimmon, which bought Westbury for £643m just over a year ago.

Barratt is due to take over the number one spot once its £2.2bn takeover of Wilson Bowden is complete, but these guys will be cast into the shade if the Taylor Wimpey deal goes through.

It’s one of those interesting periods of “market repositioning”, a phrase oft-used by City analysts, but that rarely transpires in reality. These three giants are starting to pull away from their rivals, so that no longer can we refer to a top five or 10.

No, we now have a big three, firms that can only get stronger. In the FTSE-100 companies have access to tracker funds, meaning that it is far easier for them to raise extra finance. The cost savings they will generate through redundancies and merging operations will mean that they can prove their financial prudence to lenders, who will happily throw them cash given the seemingly endless price boom.

In short, this trio will soon expand their war chests even further, meaning that there will be more consolidation as they strengthen their new-found market dominance.

Housebuilders could become the next supermarkets. For Asda, Tesco and Sainsbury’s, read Barratt, Taylor Wimpey, and Persimmon.

And just like it is no use the local butcher and baker complaining that they cannot possibly sell at the prices of the big boys, to survive smaller housebuilders will have to work on improving the quality of their product. However, with the cash now at the big three’s disposal, smaller companies listed on the stock exchange will be feeling the heat – if a massive offer is made, directors only have the right to honour the shareholders by accepting it.

The repositioning is not over yet, but the new market hegemons have already been decided, and they are sure to grow bigger.