The housing sector’s remarkable resiliency in the face of tanking share prices post-Brexit was a frequently written about topic in 2016. As stronger than anticipated results from Barratt Developments, The Berkeley Group Holdings and Persimmon poured in over the second half of the year, listed builders recouped some of their tremendous share price losses.
And now Persimmon has kicked off the new year with more good news for investors, posting 8% higher revenues of £3.14bn, ahead of its final results. The firm also reported that the average selling price of its homes had increased by 4% to £206,700 and the value of its forward sales at 31 December 2016 was already circa £1.2bn, 12% higher than last year’s figure.
Although LGIM is among Persimmon’s top ten institutional holders, owning 2.58% of the business, Penny thinks a number of risk factors in the housebuilding sector remain, the most immediate being the upcoming UK housing white paper.
Though some divisions have arisen between conservative MP Sajid Javid and senior Tories over planning reforms, the government has stated one of its objectives is to make more houses available. Penny believes this could be a problem for the FTSE builders.
He said: “There is a small danger that the January white papers might favour smaller builders or might emphasise the private rented sector. Post-Brexit the thought was that the government would do everything they could to support the housing market but that doesn’t necessarily mean it must benefit the big, quoted builders. There have been lots of incentives given to them over the past two to three years, and they haven’t necessarily pushed up their volumes.”
