How housebuilders toppled FTSE 100

There’s no doubting that Persimmon (PSN) has traded well in recent months, buoyed in particular by the government’s Help to Buy scheme for first-time buyers. But does this really justify the 63% surge in its share price in the past year and the doubling in the price since the Brexit vote?

Some analysts clearly think the market has got too excited on the housebuilding sector, especially given expectations that chancellor Philip Hammond will try to woo the young vote with initiatives to speed them onto the property ladder.

In particular, there’s been talk about radical reform of planning rules when Hammond stands up to deliver his Budget later this month.

Persimmon said today that achieving detailed planning consent was as challenging as ever and that it was time for more effective processes to allow the industry to increase the number of active outlets and overall output.

But how far Hammond will go to help the industry is open to doubt. Barclays analysts issued a note last week in which they downgraded housebuilders because they believed expectations may have run ahead of themselves.

They said: “We are not signalling that we believe housebuilding fundamentals have deteriorated. Or that we expect the greater likelihood of rate rises to upset the apple cart.

“However, very strong share price performance leaves little scope for disappointment and we believe expectations of further government measures could be overblown.”

The broker downgraded Persimmon and Berkeley (BKG) to underweight and Redrow (RDW), Bellway (BWY) and Taylor Wimpey (TW.) to equalweight.

In this context, it’s hardly surprising that Persimmon shares were punished today after what appeared to be a steady if unspectacular trading update. Shares were 107p lower at 2,767p, a drop of nearly 4%.

The group reported about £909 million of forward sales reserved beyond 2017, an increase of 10% on the same point last year. Pricing remains firm across its regional markets.

Liberum analyst Charlie Campbell said the information not included in the update from Persimmon was more significant.

He said: “By omitting the usual metric of private sales per site per week and replacing it with a comment that total sales per site per week were flat suggests that private sales per site per week are likely to be slightly slower than last year.”

Persimmon also declined to give margin guidance in the statement, suggesting to Liberum’s Campbell that margins in H2 will be consistent with H1.

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