The new Governor of the Bank of England is clearly of the view that they could contribute to an asset bubble – a view with which I concur.

Housebuilders are seeing demand accelerate – recent comments have been that the sales rates and reservation rates are significantly higher (Bovis has seen a 43% increase in private reservations in the year to date, Taylor Wimpey up 38%, Bellway up 27%, Barratt forward sales up 53%). Reported revenues have been rising in the first half of 2013 – Barratt up 21%, Bellway up 20%, Bovis up 17%, Persimmon and Taylor Wimpey up by 11 or 12%.

What is interesting is the increase in their profits. Barratt’s pre-tax profits are likely to be up over 60% in the first half of 2013 compared with the first half of 2012, Taylor Wimpey’s profits were up 42%, Persimmon’s 39%, Bellway’s 25% and Bovis up by 19%.

So, revenues are increasing nicely. However, the number of completions has been much less. Bovis and Taylor Wimpey only completed 2% more homes in H1 2013 than H1 2012, Barratt completed 4% more and Persimmon 6%. Average selling prices have however increased by at least 4% (in the case of Bovis and Barratt it was over 14%) despite the housebuilders reporting that house price inflation was between 1% and 2%. Is the balance entirely due to product mix (more higher margin larger properties, fewer apartments)? Profits have been accelerating, margins have increased and it suggests that asset prices are beginning to resemble a bubble.

It is of course in the housebuilders’ interest to sell as few houses as possible at the moment as margins will continue to increase as asking prices are bid up. Going forward, profits will continue to increase and there are likely to be upgrades to market estimates. This is what the current rating of the shares is suggesting.

What could go wrong? Interest rates could rise, the second part of Help-to-Buy which is the extension to secondhand homes due in January 2014 could be postponed or cancelled, housebuilders could start to sell many more units (in line with what the country actually needs) and then find they have to pay up for replacement land. We know the industry is cyclical.

Could we go back to where it started- when the price of land got too high? The key question is when will the forward rating of shares reflect the earnings growth in prospect? Yes, the housebuilders are making hay while the sun is shining, but this is why we are suggesting that it may be time to lock in some profits for a rainy day.

Stephen Williams is equity analyst at Brewin Dolphin