Are housebuilders finally feeling the heat? FTSE-listed builder Persimmon reported a 12 per cent sales hike in the third quarter this morning - but shares continued to slide after the sector had a spot of bother with a broker yesterday.
Sales were 12 per cent higher in the period since it reported its half year results on 18 August, Persimmon said this morning, building on a five per cent rise during the "summer weeks".
Forward sales hit £780m, up 12 per cent from the same time last year, as the company opened 105 new housing developments in the six months to the beginning of November - and it expects to squeeze in another 20 openings in the last few weeks of the year. It's acquired 16,000 new plots in the year to date, it added.
Operating margin hit 20.5 per cent during the period, a figure it insisted it can improve on in the next six months, while cash balances are likely to increase from the £378.4m it held at the end of last year.
Shares dipped 2.3 per cent to 1,876p in early trading.
Why it's interesting
The house price crash during the financial crisis may have been devastating - but since then the trajectory of prices has been firmly upwards, and housebuilders have been reaped the benefits, causing the share prices of sector giants such as Persimmon to jump.
Since 2008, the company's shares have risen tenfold, from just shy of 200p to peak at 2,130 in September this year.
But having done everything in their power to get the market moving again, in recent months the government and Bank of England have introduced tightening measures, limiting the loan-to-income ratio of mortgages, and introducing a more punishing stamp duty regime at the top end of the market.
Yesterday broker Liberum three of the UK's largest housebuilders, including Persimmon, a "sell" rating, saying their valuations were "too optimistic" because "gross margin pressure" in the coming years could thanks to "a more vigilant regulator and build cost inflation returns".
Liberum wasn't the only one to hint the UK's housing sector might not be in the rude health it once was. Last week economists at UBS finally used the b-word in connection with London's housing sector, ranking it top in their Global Real Estate Bubble Index. While Persimmon has largely stuck to the outskirts of the capital, if the "bubble" does burst, that's likely to have a knock-on effect across the rest of the country.
What Persimmon said
As we moved into the autumn selling season customer activity strengthened in line with the traditional seasonality of the market.
Mortgage approval volumes have continued the positive trend established since the start of the second quarter with approvals for house purchase in September 13 per cent ahead year on year.
With the introduction of improved regulation and Bank of England oversight measures mortgage lenders are required to remain disciplined credit providers. These structural improvements in the mortgage market will, we believe, support a more stable and sustainable outlook for the housing market in the UK in the future.
Another strong performance for a strong business in a strong market - but tighter conditions may be ahead.