Descending asking prices for homes in the UK hit housebuilders early on Monday, with Taylor Wimpey PLC (LSE:TW.), Persimmon PLC (LSE:PSN) and Barratt Developments PLC (LSE:BDEV) leading the FTSE 100’s fallers.
According to property website Rightmove, average asking prices fell by a hefty 1.9% in August, marking the largest monthly decline since 2018.
Prices fell by 0.1% over the year meanwhile, representing the first annual dip since 2019 as potential buyers were “preoccupied by holidays, inflation, and the highest base rate since 2008,” Rightmove said.
Taylor Wimpey fell 4% and Persimmon, Berkeley Group Holdings PLC (LSE:BKG) and Barratt Developments more than 2% on Monday following the news.
To make matters worse, FTSE 250 constituent Crest Nicholson PLC (LSE:CRST) gave a stark insight into how the housing sector’s woes were feeding through to builders on Monday morning.
Following worse-than-expected trading during the summer, Crest Nicholson lowered adjusted pre-tax profit guidance for financial year 2023 from £73.7 million to £50 million, providing further fuel for the sector-wide selloff.
“It serves as a reminder that higher mortgage and interest rates are beginning to gain some traction, which unfortunately comes at a time when the broader economy is posting little more than anaemic growth,” interactive investor Richard Hunter commented.
A “chronic shortage” of housing supply in the UK should somewhat stem the downturn in the market, interactive investor’s Victoria Scholar added.
However, “expensive mortgages, wider cost-of-living pressures, and a general backdrop of macroeconomic unease” look set to stay, she warned.