Bearing in mind that housebuilders spectacularly failed to notice that the housing market was heading towards a cliff edge two years ago, why are investors buying into this sudden talk of recovery and sending share prices skywards? The short answer is that nobody knows

鈥淚t鈥檚 certainly not earnings that are driving housebuilders鈥� share prices, or asset values,鈥� says Leslie Kent, analyst at JM Finn. 鈥淗ousebuilders are selling the recovery in a big way, but the number of houses being built is way below peak and the recovery is still some way off. The stock market is looking too far ahead.鈥�

Yet on the back of the sharp rise in share prices, Barratt and Redrow last week tapped the market for a total of 拢870m to fund a land buying spree. The sweetener for investors is plain to see: Barratt鈥檚 拢545m rights issue (it is raising a further 拢175m in a placing) announced, like Redrow鈥檚, on 23 September, was priced 63% below its 22 September closing price; Redrow鈥檚 was 55% lower.

But the cash call is not a vote of confidence in the future. 鈥淐ompanies have to buy new land because existing landbanks have no profit in them,鈥� says Robin Hardy, analyst at KBC Peel Hunt. 鈥淭he only way to make profit, assuming there is no inflation, is to purge yourself of your unprofitable landbank and replace it with one bought under more normal conditions, where you can make a clear margin in the market you鈥檙e in.鈥�

In short, there is no credit in the system and housebuilders are unable to increase debt and gearing, so passing the hat around is the only way they can keep some momentum in their business. Or, to put it another way, this dash for cash underlines the weakness of the recovery, not the faith in its future strength.

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