Berkeley and Persimmon to reveal housebuilder pain of interest rate hikes
UK housebuilders are set to shed light on the state of the fragile property market amid a number of key updates from firms next week.
Shareholders are braced to see accounts for Persimmon, Berkeley and Vistry all show a fall in sales numbers after higher interest rates weighed heavily on activity last year.
Interest rates rose to a 15-year high of 5.25% last year and millions of homeowners have been faced with higher mortgage rates as a result.
Housing firm shares were knocked as a consequence, but saw a slight renewal of fortunes over the past six months, buoyed by improved interest rate expectations and Barratt Homes’ bumper deal to buy rival Redrow.
However, investors in the sector have seen the improvement wilt more recently and will therefore be looking out for positive guidance this week.
FTSE 100 firm Persimmon will reveal its latest trading data in a statement on Tuesday March 12.
The company already told investors earlier this year that sales in 2023 were due to have dropped by around 16%, as it blamed the jump in interest rates and the end of the Help to Buy scheme.
It also highlighted that completion numbers were down 33% as it slowed building activity in a reaction to softer demand.
Nevertheless, there are hopes that profitability will be robust amid cautious investment and easing construction inflation.
Danni Hewson, AJ Bell head of financial analysis, said: “Completions and average selling prices will be scrutinised in the context of input cost inflation, which seems to be easing.
“Brickmakers have started to suggest that pricing is coming under pressure, which is a help, but labour costs are still likely to be on the rise.”
On Thursday March 14, rival Vistry is also expected to reveal a revenue drop due to the sluggish property market.
The Kent-based firm is expected to report revenues of around £4 billion for the past year, according to analysts, down from £4.5 billion a year earlier.
It comes as the firm has started to shift away from its traditional housebuilding to a partnership-driven model.
Shareholders will be keen to hear how the strategy shift, which could free up cash, will change the firm’s longer-term outlook.
The week will finish with a trading update from upmarket property firm Berkeley Group.
Berkeley has also witnessed a slump in sale numbers, with a 14.2% fall in deals over the first half of its financial year.
However, revenues were broadly flat as its London-focused strategy proved beneficial, with an increase in its average sale price offsetting the reduction in transactions.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: “Investors expect to hear that demand in the key London area has held up better than in most other parts of the country, thanks to both its domestic and international appeal.
“The long-term profit outlook will also be in focus, with Berkeley expecting at least £1.5 billion of pre-tax profits over the three financial years ending April 2026.”
All companies will also face scrutiny from investors after the UK competition watchdog said they were among eight firms being investigated over concerns they were sharing commercially sensitive information.
Press Association