Housebuilder Stocks Rise 45% Year to Date

Shares in Berkeley Group are up modestly as the firm confirms an interim dividend. But how long can housebuilder shares keep climbin?

Emma Wall 17 August, 2017 | 12:04AM
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Berkeley Group Holdings (BKG) is up modestly following the firm’s announcement of an interim dividend of 51.76p per share to be paid on 15 September 2017. Brokers are forecasting a 5.41% yield through to 2019. The stock currently yields 4.94%.

Not that long ago, sentiment towards the UK housebuilders was dire. Following the Brexit vote investor concerns spiked – negatively impacting commercial property funds and housebuilder stocks.

Berkeley Group was among the worst performing stocks of 2016, losing 21% in value, while Barratt Developments (BDEV) suffered similar losses. Investors believed a slower economy – caused by Brexit – would likely result in a slower growth housing market, and that property prices would fall.

But the housebuilders have recovered most of their losses this year, and their prospects look promising. Berkeley is up 33% year to day, while Taylor Wimpey (TW.) is up 27% - despite a scandal at the beginning of this month threatening profits. Taylor Wimpey had to set aside £130 million to cover the cost of its leasehold misjudgement where it had sold houses leasehold with ever multiplying costs for inhabitants.

Elsewhere in the sector, Persimmon (PSN) is up an impressive 45% year to date, buoyed by solid first half results and Barratt Developments (BDEV) has risen 33%. Redrow (RDW) and Bellway (BWY) have risen 36% and 30% in value year to date.

Can the Rally Last?

Eric Moore, manager of the Miton Income fund, says that this run cannot continue much longer.

“There are signs that consumption growth is fading. House prices are much too high, but if they weaken it’s another blow to the embattled consumer,” he explained. “We have very little exposure to the domestic UK economy as a result: no food retailers or property companies and very little in housebuilders, leisure and general retailers.”

His colleague Andrew Jackson who runs the Miton UK Value Opportunities fund,owns Bellway – but remains “somewhat cautious on the prospects for these businesses”.

While the price outlook is mixed for housebuilders, they have been solid income payers. According to the latest Capita report, consumer goods and housebuilders performed especially well in the first half of 2017, with every company raising its pay-out. Consumer goods and housebuilder stocks paid out £4.8 billion in the three months to the end of June, an annual increase of 8%. 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Barratt Developments PLC478.00 GBX0.00Rating
Bellway PLC2,766.00 GBX-1.28Rating
Berkeley Group Holdings (The) PLC4,748.00 GBX-1.12Rating
Persimmon PLC1,414.00 GBX-0.49Rating
Premier Miton UK Value Opps B Instl Acc236.51 GBP-0.46Rating
Redrow PLC664.50 GBX-0.67
Taylor Wimpey PLC146.10 GBX-0.41Rating

About Author

Emma Wall  is former Senior International Editor for Morningstar

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