Housebuilding sector to come under spotlight with a trio of results

·3-min read
Investors will get a good idea of how the housing market is faring with a trio of leading housebuilders unveiling financial results next week (Gareth Fuller/ PA) (PA Archive)
Investors will get a good idea of how the housing market is faring with a trio of leading housebuilders unveiling financial results next week (Gareth Fuller/ PA) (PA Archive)

Investors will get a good idea of how the housing market is faring with a trio of leading housebuilders unveiling financial results next week.

Barratt Developments, Berkeley Group and Vistry are all set to update shareholders on their performance amid reports the housing sector is losing steam.

London-listed housebuilding giants Barratt, Berkeley, Persimmon and Taylor Wimpey all fell to the bottom of the FTSE 100 on Friday after HSBC issued a stark warning over the future of the industry.

Analysts at the bank predicted a downturn in the UK’s housing market and downgraded the country’s housebuilders, setting a negative tone ahead of the firms’ company results.

Higher mortgage costs and a slump in consumer confidence could begin to slow the demand for housing

Matt Brizman, equity analyst at Hargreaves Lansdown

Barratt will tell shareholders how it performed in the past year having upped its annual profit forecast in July.

The construction giant said it expected pre-tax profits for the year to June 30 to hit more than £1.05 billion, marginally ahead of analysts’ estimates at the time.

This is despite battling a steep rise in build costs in recent months which have risen around 10%.

The surge reflects runaway energy and fuel costs hitting the business.

Mortgage experts have also hinted at trouble in the waters for the property market which has shown signs of losing momentum in recent weeks.

Nationwide said it expects cost-of-living pressures on household budgets coupled with rising interest rates to slow the housing market in the coming months.

Investors will want to be reassured that demand for new homes is resilient against rising costs, analysts said.

“Higher mortgage costs and a slump in consumer confidence could begin to slow the demand for housing,” said Hargreaves Lansdown equity analyst Matt Brizman.

“The forward order book remains in a strong position for now, but any update on how these factors could impact demand would be welcomed.”

He added that investors will be keeping an eye on the impact of cost inflation on Barratt’s margins when it releases its balance sheet on Wednesday.

High-end developer Berkeley Group will also give investors a view of how it is coping with the current economic pressures when it releases a trading update on Tuesday.

The London-focused company previously expressed confidence in its earnings to date but could be under pressure from intensifying cost inflation and ongoing labour shortages, analysts said.

The prospect of a looming recession, tentative signs that the housing market is starting to cool, rising interest rates for the Bank of England and build cost inflation have created a hostile environment for investors

Victoria Scholar, Interactive Investor

Finally, housebuilder Vistry said last month it had exceeded expectations over the first half of the year, ahead of its results which will be unveiled on Thursday.

The company was optimistic about demand remaining strong despite the cost-of-living crisis putting pressure on house price growth.

Shareholders will be looking to see this upbeat sentiment reflected in the group’s half-year results, with analysts predicting pre-tax profits to total £184 million.

Victoria Scholar, head of investments at Interactive Investor, said: “The prospect of a looming recession, tentative signs that the housing market is starting to cool, rising interest rates for the Bank of England and build cost inflation have created a hostile environment for investors, who are eschewing the sector, despite the imbalance between supply and demand in the market.

“It has been a tough year for the sector with Berkeley Group down by around 30% from the highs in 2021 as the buy case becomes less and less compelling from the analysts.”