Housebuilder stocks have gone into sharp decline this morning with the share price of Berkeley Group, Barratt Developments, Taylor Wimpey and Vistry (formerly Bovis) all losing between 2% and 4%. The sell off comes despite Greg Fitzgerald, chief executive of Vistry, reporting that post-lockdown buyer interest has been higher than at any point in recent years. The executive said the company’s sales since the beginning of July have been 20% ahead of the same period last year.
However, that hasn’t prevented a Tuesday morning slide of close to 3% for the Vistry share price. The company’s peers haven’t done any better, with Berkeley Group down over 3%, Barrat Developments down 3.35% and Taylor Wimpey sliding in value by 2.3%
House prices also gained, up 1.6% in August, according to the Halifax house price index. Over the past 12 months, UK house prices have gained an average 5.2%. The average home now costs £245,747. The Nationwide index recorded an even bigger leap in August, with house prices up 2% to an average of £224, 123. August’s growth for the Nationwide index was the most significant over a month in 16 years.
However, with the surge in buying seen as the result of pent-up demand over lockdown and a temporary cut to stamp duty, industry experts fear the boom will prove short-lived. Halifax managing director Russel Galley commented:
“Rising house prices contrast with the adverse impact of the pandemic on household earnings, and with most economic commentators believing that unemployment will continue to rise, we do expect greater downward pressure on house prices in the medium term.”
A similar sentiment was expressed by Anthony Codling, property market analyst and founder of property portal Twindig. Quoted by The Times newspaper, My Codling states:
“My concern is that this is further evidence of a two-speed housing market, where life carries on as normal for the property ‘haves’ but becomes increasingly difficult for the property ‘have-nots’. If the UK housing market is not open to all I fear that the recovery is being built on sand rather than rock.”
The mortgages market hints that while lenders are keen to provide loans to homebuyers, they are also becoming more cautious. Mortgage approval rates have bounced back to pre-lockdown levels. But at the same time lenders are starting to withdraw their highest LTV products. HSBC is no longer offering new clients 90% LTV mortgages.
Homebuilder stocks are dropping as a result. The presumption is that while numbers are currently good, if the market flags, companies will struggle to make up for the period over lockdown where sales did drop, leading to losses. Completion rates this year will also be impacted due to disruption of construction over the height of lockdown and social distancing measures implemented on building sites since.