House building
Post Brexit

It’s been a chaotic time in Westminster recently but Theresa May has now been appointed to succeed David Cameron as Prime Minister and the ‘captain’ to steer the UK to its next destination following the result of the referendum.

Housebuilders monitoring market confidence

The result of the referendum was perhaps not the one wanted by many in the property industry with the value of the top 10 housebuilders decreasing almost £6.9bn over the first two days of trading.

On 27 June, 2 days after the vote, share prices of national housebuilders fell with Barratt, the UK’s largest housebuilder, share price down approximately -40%. Other national housebuilders including Taylor Wimpey and Persimmon also experienced similar trends. Share prices of listed housebuilders Berkeley and Countryside with exposure concentrated to housing markets in the south-east of England were less affected.

Whilst Government has been reforming, housebuilders have been closely monitoring market confidence to establish how sales rates and values are performing in sales outlets. Taylor Wimpey released their half year results on 27 July stating, “One month on from the EU Referendum, current trading remains in line with normal seasonal patterns. Customer interest continues to be high, with a good level of visitors both to our developments and to our website.”

This is a familiar message being echoed by many other housebuilders in the region which is encouraging. Eight weeks on from the referendum this positive sentiment is also reflected in the markets with Taylor Wimpey, Barratt and Persimmon’s share price all up approximately +30% since their initial decline.

The full impact of the referendum on housing markets is still not known and housebuilders still have areas of uncertainty, notably if sales rates and values will indeed remain in line with appraisal assumptions and if build costs will increase where construction materials are imported. However what the industry will be keen to avoid is talking itself in to a self-perpetuating slowdown though mere speculation of what might be.

Positive messages from Government

It’s early days but there are plenty of positive messages coming out of the new Government, with Theresa May highlighting her strong desire to address what she has termed the country’s “housing deficit”. This appears to be a key plank of her response to the sense of disenfranchisement expressed by many through the referendum. She has also called for more Treasury-backed project bonds for new infrastructure and the use of community benefit packages that reward residents rather than local authorities for the delivery of new development.

Meanwhile, the new Secretary of State for Communities and Local Government, Sajid Javid, has made clear that building more homes is top of his list of priorities.

My priorities are to build more homes and increase homeownership, devolve powers to local areas and help communities deliver excellent public services.

Sajid Javid, Secretary of State for Communities and Local Government

Whether the UK is in or out of the EU, the sentiment for housebuilding in the UK has not changed and this has been reinforced by the new Government. Housebuilders have reason to remain positive as new housing still needs to be delivered at a rate previously not achieved even prior to the referendum, supported by the Government’s manifesto to build more homes.

The housebuilding industry has experienced turbulence at political and investor level post referendum but market conditions appear to be stable and the ship appears to have been steadied, at least for the time being.

Alex Cox, Associate, Residential Development

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