Shares in big UK estate agent chain fall as housing market cools

Housebuilders also see share price falls as interest rate rises and cost of living crisis deter potential buyers

Shares in one of the UK’s biggest estate agent chains and some of the largest British housebuilders fell on Friday, amid the latest warnings about the outlook for the housing market, as potential homebuyers are squeezed by rising interest rates and the cost of living crisis.

The share price of LSL Property Services, one of the UK’s largest estate agent chains, tumbled by as much as 11% after it warned on profits for the second half of the year and said conditions in the housing market had become more challenging than anticipated.

Meanwhile, the share prices of some of the UK’s biggest housebuilders listed on the London Stock Exchange also slid, after analysts at the German investment bank Berenberg slashed their profit forecasts for the sector as a result of further declines in consumers’ ability to afford new homes.

Developers including Persimmon, Taylor Wimpey, Bellway, Vistry Group, Redrow and Berkeley all saw their shares trade about 1% lower on Friday morning, before recovering slightly during the course of the afternoon.

Persimmon’s shares have dropped by nearly 54% so far this year, while its rival Taylor Wimpey’s shares have slipped 40% since January amid the worsening outlook for the UK housing market.

David Stewart, LSL’s chief executive, said the UK’s housing and mortgage markets had been “disrupted by political uncertainty and sharply increasing interest rates” since the disastrous mini-budget unveiled in September by Liz Truss’s government.

He added: “Across the market, this has given rise to a reduction in mortgage activity and new house sales, and an increase in fall-throughs of previously agreed sales.”

Analysts at Berenberg outlined their “cautious” view of the outlook for the home construction sector in a research note as they forecast that UK house prices would fall by about 5% between 2023 and 2024, while property sales volumes would decrease by 10%.

Homeowners are being hit by rising interest rates, according to the analysts, while affordability of mortgages is “deteriorating materially”.

Mortgage costs as a proportion of income have hit 50%, they reported, well above the 20-year average level of 36% and close to the 52% level seen during the global financial crisis.

The analysts slashed their forecasts for pretax profits for the sector by an average of 40%, adding they expected earnings for housebuilders to reach the bottom in 2024.

Russ Mould, the research investment director at the stockbroker AJ Bell, said this move “may surprise investors who took the view that so much potential bad news was already factored into the value of housebuilders’ shares”.

Contributor

Joanna Partridge

The GuardianTramp

Related Content

Article image
MPs back plan for ombudsman to resolve new homes disputes
Service would be free and help new-build buyers to get faster redress for defective properties

Julia Kollewe

30, Jun, 2018 @6:00 AM

Article image
Housebuilders pledge £1.3bn for fire safety work on mid-rise blocks
Funds for remediation including removal of flammable cladding still short of £4bn government estimate

Kalyeena Makortoff

06, Apr, 2022 @7:00 PM

Article image
Housebuilder shares plunge after people urged to delay moves
Government Covid-19 advice has impact on Persimmon, Barratt, Redrow and more

Mark Sweney

27, Mar, 2020 @10:28 AM

Redrow rises as it predicts rising housing demand

Shares in housebuilder Redrow are higher after it sought to reassure the market that demand for new homes looks set to rise despite the flood of downbeat economic news

Katie Allen

03, Nov, 2011 @3:30 PM

Housebuilders' shares to continue rising, says HSBC
Bank forecasts steady housing market recovery and strong performance from quoted builders

Nick Fletcher

29, Nov, 2012 @11:53 AM

Article image
UK construction firms split over coronavirus shutdown
Bellway and Barratt among developers to close sites but Berkeley and others stay open

Julia Kollewe and Jillian Ambrose

25, Mar, 2020 @5:11 PM

Article image
UK's biggest housebuilders shrug off Brexit vote
Barratt, Redrow and Berkeley bounce back after post-referendum blip, defying predictions of lengthy slump

Rob Davies

07, Sep, 2016 @4:57 PM

Article image
Exodus of first-time buyers puts brakes on UK housing market
Hike in mortgage costs after mini-budget cuts 20% off buyer demand in October

Jess Clark

14, Nov, 2022 @12:01 AM

Article image
Housing market looks gloomy, warn builders and mortgage lenders
Announcing its annual results, Barratt Developments warns that trading conditions remain tough and says that it will not reinstate dividend payments

Julia Kollewe

08, Sep, 2010 @4:34 PM

Article image
Persimmon reports sales and price fall as UK property market dips
Housebuilder says cancellation rate has risen sharply because of interest rates and economic uncertainty

Julia Kollewe

08, Nov, 2022 @9:48 AM