Housebuilder shares are falling for the second day in a row: Here's why

 
Emma Haslett
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Housebuilders are being hit for the second day (Source: Getty)

Shares in housebuilders tumbled for the second consecutive day this morning, after a double whammy of bad news from the Royal Institution of Chartered Surveyors (RICS) and housebuilder Redrow spooked investors.

On the FTSE 100, Persimmon was the biggest faller, dropping 2.6 per cent, but Taylor Wimpey, Barratt and Berkeley Group all slid lower.

On the FTSE 250, Redrow fell 4.8 per cent, while Crest Nicholson, Bellway, Bovis Homes and Countryside all followed suit.

FTSE 100 FTSE 250
Persimmon -2.6% Redrow -4.8%
Taylor Wimpey -2.4% Crest Nicholson -4.7%
Barratt -2% Bellway -3.9%
Berkeley Group -1.3% Bovis Homes -3.6%

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Bad news

Although housebuilder shares recovered well from their battering following the Brexit vote, analysts have warned of "headwinds" against the housing market.

After investors were shaken by results from Persimmon, the UK's largest housebuilder by volume, yesterday, this morning's RICS survey delivered another blow, warning the UK's housing market is likely to remain "subdued" in the coming months.

Meanwhile, in an update ahead of its AGM, housebuilder Redrow warned political and economic uncertainty had led to a "slight slow down" in sales over recent weeks.

Yesterday Shore Capital's Robin Hardy warned of "stiffening headwinds" for housebuilders with rising costs and a loss of confidence both affecting the sector.

Today Chris Beauchamp, chief market analyst at IG, added:

The only consolation for the industry is that the BoE has effectively scrubbed the idea of further rate rises, which at least reduces worries that mortgage demand will slow too.

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Confused picture

However, Stephen Wasserman, managing director at West One Loans, added: “Today’s RICS figures showing subdued activity are disappointing; however, industry analysis over the past few months has painted a confused picture of the property market, so it is important not to get carried away and assume this flat-lining is a downward trend.

Political and economic turmoil, alongside the competitive environment and supply vs demand issue, have all contributed to wider market uncertainty in recent months, and this has undoubtedly hindered buyer and investor demand.

He added: "While it may take time for the sector to reach its full potential, the market has shown its underlying resilience before, and we are cautiously optimistic that the market will pick up in due course – especially if the rumoured stamp duty changes for first-time buyers are a topic in this month’s Budget."

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