Rather than stepping up a rung, UK housebuilders are likely to slide on the back of chancellor Kwasi Kwarteng’s mini-budget, reckons Charlie Campbell, equities analyst at Liberum.
Kwarteng’s mini-budget was “very helpful for the housebuilders in boosting consumer cash flows, reducing stamp duty and cutting their taxes,” said Campbell.
But the bond market’s reaction to the budget has tampered some expected stability in the housing markets, with mortgage rates likely to hit 5% if bond yields remain at this level.
Kwarteng’s announcement of sweeping tax cuts for high-income earners, large-scale borrowing, and a reversal of national insurance contributions was met by bemusement from thinktanks and Tory backbenchers, not to mention a crashing pound and FTSE index.
“Even with the boost from personal tax cuts, the outlook is more precarious,” said Campbell, though he reasoned that “valuations continue to discount a worse outlook than seems likely, especially as forced selling is unlikely to be seen in any meaningful scale.
Kwarteng’s mini-budget was nothing if not risky, and housebuilding shares have so far reacted poorly to his dice roll.
Persimmon is down 12.2% over five days; Barratt 10.1%; Bellway 11.7%; Taylor Wimpey 10.8%; and Berkeley Group slightly better at 6.2%.