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Shares in Taylor Wimpey (TW.) find themselves towards the back of the UK 100 today, falling for the second consecutive day and as much as 5% after the Housebuilder released its Q4 trading statement this morning.
The general sentiment of TW’s trading statement today echoed that of peer Persimmon’s (PSN) yesterday, reiterating the uncertain backdrop for the UK housing market, however also reporting that the business remains resilient; completions were up by 5% while the average selling price also improved, climbing by 4% year-on-year.
Despite management positivity stemming from the release, shares fell.
A marginal miss on revenues (£3.84bn vs £3.91bn exp.) drew investor concern that the sector may have reached a top. In fact, today’s release prompted an even frostier response from the wider UK Index housing contingent, perhaps pricing in disappointing revenues as a reflection of wider market sentiment, dragging peers towards the bottom of the pile.
Persimmon, which itself fell 1.2% after its trading statement yesterday, is down by a further 1.6% today, while Barratt Developments (BDEV; reporting tomorrow) also trades offside by over 1.5%.
Having been supported from its post-Brexit lows by a combination of fresh government commitment to the ‘Help to Buy’ scheme, and the widely touted post-referendum demand slump failing to materialise, the housing sector is now reaching a crossroads.
Colossal remuneration packages – see Persimmon CEO’s £110m pay day – combined with the ever-mounting concern that UK companies will face a no deal Brexit, have left investors in a quandry about how the sector will progress in the medium to long term.
Potential labour supply shortages stemming from a reduction in immigration on top of a lack of foreign demand are the perceived worst-case scenarios of a Hard Brexit, reflecting the sharp share price sell-offs that came about on the fateful EU referendum day in June 2016
There may be some light on the horizon, however. Shares are yet to break or even test a 6-month rising channel floor, and are already trading back above 200p from their lows of 198.5p.
Continued digestion of housebuilder health will take place tomorrow as fellow UK 100 constituent Barratt Developments reports its Q2 figures.
Will it help to engineer a recovery or will it knock down key foundations?
Henry Croft, Research Analyst, 10 January
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