Persimmon, Berkeley and Vistry set to reveal fragile state of property market
UK housebuilders are set to reveal key updates about the shaky property market.
Investors are preparing for a drop in sales numbers from Persimmon, Berkeley and Vistry after higher interest rates affected activity last year. Interest rates reached a 15-year high of 5.25% last year, causing millions of homeowners to face higher mortgage rates.
Shares in housing firms took a hit as a result, but they've seen a slight upturn over the past six months, helped by better interest rate expectations and Barratt Homes' big deal to buy rival Redrow. However, investors have recently seen this improvement fade and will be looking for positive news this week.
FTSE 100 company Persimmon will share its latest trading data in a statement on Tuesday March 12. The company already told investors earlier this year that sales in 2023 were expected to have fallen by around 16%, blaming the rise in interest rates and the end of the Help to Buy scheme.
It also pointed out that completion numbers were down 33% as it slowed building activity in response to weaker demand. However, there is hope that profitability will remain strong amid careful investment and easing construction inflation.
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Danni Hewson, who is the head of financial analysis at AJ Bell, commented: "Completions and average selling prices will be scrutinised in the context of input cost inflation, which seems to be easing. Brickmakers have started to suggest that pricing is coming under pressure, which is a help, but labour costs are still likely to be on the rise."
This Thursday, March 14, Vistry, another big housebuilding company, is expected to say revenues have fallen because houses aren't selling as well. Analysts think the company from Kent will report they made about £4 billion last year, which is less than the £4.5 billion they made the year before.
This news comes as the company has been changing from just building houses to working more with partners. Investors will want to know more detail about any new business strategy.
At the end of the week, the Berkeley Group, will update on their trading. Berkeley has seen fewer people buying their homes, with sales down by 14.2% in the first half of their financial year. But their revenues could be more stable because they sell expensive homes in London, and even though they sold fewer homes, each one cost more.
Aarin Chiekrie of Hargreaves Lansdown, said: "Investors expect to hear that demand in the key London area has held up better than in most other parts of the country, thanks to both its domestic and international appeal. The long-term profit outlook will also be in focus, with Berkeley expecting at least £1.5 billion of pre-tax profits over the three financial years ending April 2026."
All companies will also face scrutiny from investors after the UK competition watchdog said they were among eight firms being investigated over concerns they were sharing commercially sensitive information.
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