Is now the right time to buy housebuilders?

Helal Miah, investment research analyst at The Share Centre, comments on the future for housebuilders following a number of results from companies over recent weeks.

Is now the right time to buy housebuilders?

Persimmon was the first of the housebuilders to update the market when it stated that demand for houses has actually increased since the EU Referendum last June with the forward sales book up 12% on this point last year to £1.23bn. The group’s confidence was underlined by news that it has acquired a further 18,700 plots and opened 255 new development sites during the year.

This positive trend continued, in regards to Taylor Wimpey’s statement at least. The company, which is one of the biggest house builders in the country, noted that it was ‘unfazed’ by post-Referendum uncertainty in the market, predicting that its profits will be at the higher end of analysts’ expectations. The average selling price of homes increased by 13% to £286,000, and it ended the year in a strong position with more cash than last year, even after paying dividends.

Barratt Developments was also keen to highlight that overall market conditions were healthy with strong demand for new homes, indeed total forward sales were up 15.8%. However, the group’s heavy reliance on the London property market has presented some headwinds, in particular in regards to its full year targets with the group subsequently airing a cloud of concern.

Despite the worthy forward looking prospects, good consumer confidence, mortgage availability and ongoing government support, there remains an air of uncertainty around the housebuilders.

Investors interested in the sector will undoubtedly be more than aware that these companies suffered in the immediate aftermath of the Brexit vote back in June, and this led to the sector as a whole becoming more cautious. Indeed, the unknown impact from the Brexit negotiations will continue at least through 2017 and likely until the United Kingdom leaves the European Union, and this timeframe is uncertain.

We would advise investors interested in the sector to keep their wits about them. Although housebuilders are still acquiring land banks and plots, companies as well as analysts remain vigilant.

 

Please remember, no news or research item is a recommendation or advice to buy. Every Investor is not responsible for accuracy and may not share the author’s views. If you are unsure of the suitability of any investment for your circumstances please contact an adviser. All investments can fall as well as rise in value so you could get back less than you invest. 

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