Builders face an end to era of through-the-roof house prices
Just when you thought the UK housing market had to calm down after 2021’s exuberance, it turns out buyers’ appetite kept growing, even in the darkest days. Britain’s housing market saw its strongest January in a decade and a half – its fastest growth rate since 2005. Annual price growth hit 11.2% and the average price of a home reached £255,556, according to Nationwide.
All of this is music to the ears of the UK’s largest housebuilders – many of which are reporting 2021 results this week – and should have paved the way for bumper profits.
The boom has seen the likes of Persimmon, Taylor Wimpey and Vistry (formerly known as Bovis Homes) bank higher profits as they also benefit from more than a decade of ultra-low interest rates, central bank exuberance and Treasury munificence via the Help to Buy scheme. What, if anything, can halt their winning streak?
Well, the events of the past week, coupled with the wider stock market gyrations since the start of the year, may give some pause for thought. Despite their run of soaring sales, housebuilders have fallen out of favour with investors in recent months. Persimmon and Taylor Wimpey’s shares are around a third below highs seen last April, and it is a similar story at Vistry.
And shareholders are right to be cautious. The cost of living crunch is eroding households’ spending power, at a rate that continues to confound central bankers. As energy, fuel and food prices march ahead of wages, there is a growing risk that this will bleed through to the housing market. Rising interest rates could dampen ambitions, although mortgages still remain incredibly cheap by historical standards. Worse still is the threat of a concerted global downturn, amplified by Russia’s invasion of Ukraine,
Read more on theguardian.com
