Friday, January 28, 2022

British homebuilders have had the worst storm in almost two years, a perfect storm

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* Home builders in the UK have hit a 3-month low

* The sector has shrunk by 10% in a week

* Coating removal will account for 10% of the sector market – UBS

* Countryside Properties shares fell 20%

LONDON, Jan. 13 () – British homebuilders hit their worst weekly performance since the UK’s first blockchain under the weight of placing discounted stocks in 2020, with weak sales updates allowing government companies to remove flammable materials from buildings. he ordered.

Most analysts had positive forecasts for homebuilders for 2022 against the backdrop of expanding economic recovery, but the negative news flow pushed the FTSE 350 Household Goods and Homebuilders Index down about 10 percent this week, the lowest in three months. On Thursday, it fell 3%.

Shares of top homebuilder Barratt Developments Plc and No. 3 player Taylor Wimpey fell 9 percent each this week, and their discounted shares surprised investors.

Other FTSE builders, including Persimmon and Countryside Properties, also started the year wrong.

Persimmon, the UK’s second-largest homebuilder, was the biggest loser among London’s blue chips on Thursday, but the company said it expects a higher profit margin in 2021. According to JP Morgan, the size of the houses built was slightly softer than expected.

Shares of Countryside Properties fell 20 percent after their first-quarter results fell short of expectations and the CEO announced his immediate resignation.

Jeremy Leung, portfolio manager at UBS Asset Management, said: “The sector was weak in the combination of overlays, supply chain problems and disease-related downtime among workers.”

The UK has ordered home builders to pay about $ 5.4 billion to help remove hazardous coatings from buildings after a devastating fire in London in 2017, which is a wide range of low-cost flammable coatings in multi-storey homes. determined.

The additional cost will affect the stock, Leung said.

UBS estimated that coverage costs accounted for one-tenth of the sector’s market capitalization, but that could be lower if the government announced tax breaks for these companies, he added.

The UK housing market has shown resilience during the pandemic, driven by government buyer support measures and low mortgage rates. Indeed, London-listed homebuilders have outpaced the European real estate index since early 2020.

Despite the end of property tax breaks for buyers in September, many investors say the sector’s outlook remains strong. For example, Citi expects capital gains to be higher than before the pandemic in the next two years.

Liberum investment analyst Charlie Campbell said an increase in housing prices will offset construction cost inflation and a rise in wages will offset higher mortgage costs.

Interview with Joyce Alves; The tour was edited by Chatterjee and Thomas Janowski

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