Demand for fashionable inner-city London property is so strong that Telford Homes is joining the government’s controversial Help to Buy scheme and acquiring more land to double the number of homes it produces.

The London-focused housebuilder has already presold 99 per cent of its expected completions for the year to March 2014 and 50 per cent for the years up to March 2016.

The company’s high sales rate has been achieved without participating in Help to Buy, aimed at injecting life into the property market. But Jon Di-Stefano, chief executive, said it would be joining the scheme and this would further boost sales.

“There are lots of opportunities out there now and we haven’t even touched the surface of what Help to Buy might do to boost that over the next few years,” Mr Di-Stefano said. “Help to Buy brings a whole new tranche of buyers into the market.”

It has raised £20m via a share placing to buy more land. Together with an increased bank facility secured in April the share sale will give the group nearly £50m to invest in new development opportunities.

Telford recently bought a patch on Caledonian Road in Islington, London, and will continue to snap up land in the east of the capital, as well as other non-prime sites in the city centre areas of zones 1 and 2.

“Effectively the government and Boris [Johnson, the mayor] want us to build more homes and our view is that the market is there for us to do that,” said Mr Di Stefano. “There’s a fundamental undersupply in London.”

The 250p per share placing price is at a small discount to Tuesday’s closing market price of 252p. Last month Telford reported that it had trebled profits to £9m and sold 803 private homes in the year to the end of March, up 75 per cent on the previous year. Prices rose 5 per cent to an average selling price of £350,000. As a result, the gross margin rose from 17.6 to 24.3 per cent.

Telford’s success comes amid fears that London is set for a housing bubble. The International Monetary Fund has warned that the government’s Help to Buy scheme – which offers buyers an interest-free loan on a fifth of the home purchase price – could inflate prices. Former chancellor Alistair Darling said the scheme risked inflating a US-style subprime housing bubble.

Mr Di Stefano said it was too soon to say if the scheme would boost prices given that it had only been available since April 1. He added that banks were continuing to impose tighter lending restrictions than in 2006 and that this should provide a “natural break” on prices.

Housebuilders have already emerged as among the chief beneficiaries of other government schemes including Funding for Lending, which has boosted mortgage availability. The Royal Institute of Chartered Surveyors said earlier this week that the number of homes sold in the UK had soared to its highest level in three-and-a-half years over the past quarter.

Story courtesy of The Financial Times - www.ft.com