House Builder Shares Plummet With House Prices
Following the most recent Land Registry data that found property growth at its slowest recorded level in five years, shares in house builders plummeted.
Four of the top ten worst performing shares belonged to house builders when the FTSE closed on Wednesday evening.
Barratt Development shares fell by 3.03% with Berkeley falling by 3.2%. The home builders suffering more than any others were Taylor Wimpey who witnessed 3.46% wiped from their share price and Persimmon who lost 4.03% of the value of their shares.
The average UK property price in January, was £228,147. This is the lowest annual growth recorded since June 2013 when the average UK property had increased by 1.5%.
Although this represented a 1.7% increase from the average price in January 2018, it indicated a 0.8% reduction from the average property price in December 2018.
This lack of certainty has also affected the average house price paid by a first-time buyer. Although the £191,799 paid by the average FTB represents a 1.3% increase annually, the 1.1% fall from December’s average price paid is significant. Similarly, former owner occupiers are paying 0.6% less than the month previous. The average price paid by mortgage buyers was also 0.9% lower than the month previous.
Additionally, following recent criticism involving leasehold properties, a report from property management experts PBM has found that 46% of respondents have been deterred from buying a new build property as they fear greedy developers and freeholders will charge hidden and unnecessary fees.
Developers and investors may be anxious by the reduction in first-time buyers entering the market at present considering the huge profits that are being accrued from the Help to Buy scheme.
At the start of this month, it was announced that Britain’s most influential house builders paid out more than £2.3 billion in dividends.
Following over £1 billion worth of profits, Persimmon’s shareholders received £732 million. Taylor Wimpey also paid out over £500 million with Barratt Developments accruing £435 million in dividends. Although significantly reduced, Berkeley Group also shared £120 million with investors.
If the market shrinks as first-time buyers lose confidence in the price of property, house builders and investors may continue to worry that profits may depreciate until Brexit uncertainty becomes a lot clearer and confidence in property returns.
How significant are the reduction in these share prices? What will this shrinking market mean for the conveyancing sector?