Housebuilders Berkeley Group Holdings PLC (LSE:BKG), Barratt Developments PLC (LSE:BDEV) and Vistry Group PLC (LSE:VTY) all report next week against sentiment surrounding the sector that darkens by the week.
HSBC is the latest to turn bearish, with the broker predicting the UK is on the verge of a major housing downturn as mortgage costs rise.
UK demand will fall by up to 20% over the next year, it suggests, with downgrades for all of the builders as a consequence.
“The HSBC building materials team now forecasts a 20% fall in UK housing demand for a year from this autumn, a concomitant 7.5% fall in UK existing house prices, excluding central London at double that, and a 5% fall in UK new build prices,” the note said.
Underlying profits [EBITDA] across the sector will fall by an average of 43% against 2022.
Shares prices in the sector fell again on the report, led by Berkeley, down 5.4% to 3,397p and making it a dip of 29% this year so far.
Barratt was down 4.4% today to 397.1p and making it 45% for the year and though Vistry was the only builder to keep its HSBC 'buy' rating it was still down 3.1% to 718p today and is off 36% for the year to date.
HSBC though is not the only cautious commentator.
Only yesterday Citi said: “We see further downside risk to current valuations in the bear case impacted by weak demand and lower house prices,” though the question for the US bank is whether all of the expected bad news is priced in already.
And next week’s numbers are unlikely to indicate a sector in crisis.
Barratt has said already completions last year to June were 17,162 at an average selling price of £300,000, which points to revenues of £5.2bn said UBS and underlying profits of around £1.05bn.
For 2023, UBS is still forecasting volumes and sale prices to rise with underlying profits of £1.03bn.
Key for Berkeley in its interims will be whether its forecast of earnings of £545m in the current financial year to April is intact.
Vistry, meanwhile, should post half-year underlying profits of £186mln, says UBS, with consensus pointing to £417mln for the full year.
If HSBC is right those forward-looking estimates might shortly be drastically revised, but one certainty is that things will be a lot clearer this time next week.