Shares in housebuilders fell dramatically this morning as Taylor
Wimpey, Berkeley Group, Barratt Developments and Persimmon all saw loses of
nearly 10% in morning trading as the UK was thrown into political turmoil over
Taylor Wimpey’s shares fell 9.1% to 147.35p early Thursday afternoon as Berkeley Group saw a 7.05% drop to 3,400p, Barratt slid 8.35% to 500.2p and Persimmon lost 9.52% to 2,128p.
Charlie Campbell, real estate analyst at Liberum said: “It is not just in the housebuilders but things that are viewed to be adversely affected by either a hard Brexit or a Corbyn government housebuilders will be in the crossfire of that because they are high ticket items for the consumer and therefore the ultimate thing that will be affected by consumer confidence.”
Alongside the impact of the ongoing Brexit agreement negotiations, the housebuilders’ share change was also attributed to new government statistics released today showing there have been 222,190 additional dwellings built this year, up by nearly 5,000 units from 2016-17.
However, while new build completions increased by 11,720 to 196,290 over the period, the growth rate in the number of new homes being built has fallen from 11.9% in 2016/17 to 6.4% in 2017/18.
Communities secretary James Brokenshire said the figure represented the highest level of new homes delivered across England in all but one of the last 31 years and brings the total number of additional homes delivered since 2010 to 1.3 million.
He added: “Today’s figures are great news and show another yearly increase in the number of new homes delivered, but we are determined to do more to keep us on track to deliver the homes communities need. That’s why we have set out an ambitious package of measures to deliver 300,000 homes a year by the mid-2020s.”
The drop comes in contrast to last month when housebuilders saw their shares rapidly climb by up to 3.5% in response to the Budget which announced an extension of Help to Buy until 2023 alongside changes to permitted development rights (PDR).
Campbell added: “Housebuilders have been doing better in the last few weeks as people got happier with the idea of a good Brexit, or a smooth transaction whatever happens. But with a hard Brexit you can imagine that if you get to the beginning of March or April and there is chaos then people might decide to put off buying a house for a bit.
By 2pm on Thursday the pound had fallen 1.58% against the Euro to €1.13 and 1.64% against the dollar to $1.28.
Despite housebuilder fluctuations and ongoing Brexit agreement discussions, the FTSE 100 overall remained relatively stable over the morning and into the afternoon rising 0.073% to 7,038.66 points.
Despite the overall rise in new builds, the government’s recent focus on PDR has not seen a major increase in conversions. Conversions have decreased by 1,130 year-on-year to 4,550 and change of use builds from non-domestic to residential have dropped 7,470 to 29,720 driven by a decline in office-to-resi PDR, which dropped by 6,196 from 17,751 in 2016-17. This has been offset by 8,050 demolitions.
Commenting on the decline in PDR, Jason Lowes, partner at consultancy Rapleys, said: “The sharp decline in PDR developments are perhaps the most striking figure in today’s statistics, and demonstrate why the government was keen to extend the system to include retail properties [in the Budget]. PDR applications have broadly been on a downward trend since the system was introduced and this is likely due to a simple reduction in overall stock availability. As the floodgates opened, a large number of initial applications was always likely, as was the subsequent drop off as the most viable sites began to be converted. There do remain a large number of PDR applications going through the system though, and it’s clear that PDR remains an important tool for developers looking to bring forward the housing that the country needs.”
However, Joseph Daniels, founder of modular smart homes developer Project Etopia, said “the country faces a race against time [with Brexit] to get housebuilding up to speed but the needle has barely moved in the last year”.
”Despite the desperate need for new housing, fewer homes became available in 2017-18 than 10 years ago. Clearly the political capital that has been invested in talking about solutions to the housing crisis is not translating into working capital on the ground,” he added.