Rather, builders like Persimmon have “chosen higher profits over volumes,” which is contrary to the government’s current line of thinking. And if the government’s future plans do target private sector and smaller builders, listed companies might start to feel the heat from additional competition to acquire land. Coupled with a slower economic growth rate for 2017, this could have an impact on demand, Penny said.
While more supply would be less positive for pricing, Penny admits that valuations in the housing sector continue to look very attractive.
“The market is discounting certain things that we haven’t seen any evidence of, like the withdrawal of overseas banks and unemployment worries in industrial areas and manufacturing sector. I also think the mortgage availability should be good, as there isn’t too much pressure on that currently. Several housebuilder stocks are offering quite high yield and, on balance, are quite cheap.”
