Accelerated inflation and a sharper rise in interest rates makes for a pretty severe bear case for the UK housebuilding sector, according to analysts at Citi Research.
“We see further downside risk to current valuations in the bear case impacted by weak demand and lower house prices,” stated Ami Galla and Ephrem Ravi.
But on a more positive note, ”we believe sector balance sheets are in solid shape to manage the current recession risks”.
Fingers are crossed for a modest recession with a stabilisation of rates in 2023 which could shore up a more constructive sector view.
Downside risks could be “priced in” reckon the analysts, “with resilient demand trends and sector’s cash attractions supporting healthy net asset growth and higher shareholder payouts”.
Comments emerging from Nationwide today were in concert with the above.
"We expect the market to slow further as pressure on household budgets intensifies in the coming quarters, with inflation set to remain in double digits into next year,” said Nationwide’s chief economist Robert Gardner.
Yet despite price growthL slowing to 10% in August from 11% in July, that was still ahead of expectations of 8.9%.
London-listed Barratt Developments was trading 2.8% down at 415.4p while Persimmon was 0.8% down at 1,465p as of September 1, 16:15 BST.