Housebuilder shares rise sharply as slowing inflation eases property market concerns

Housebuilder shares soared on Wednesday as official data showed signs of inflation slowing in the UK.

UK housebuilder shares have been under pressure in 2023 amid rising interest rates and a consumer squeeze, but signs the economy looks set to turn a corner have put them on track for their best day of gains since 2008.

However, while consumer price inflation falling to 7.9 per cent in June has benefited housebuilder shares, companies in the sector still face hurdles. 

Rising: UK housebuilder shares enjoyed strong gains on Wednesday 

Persimmon shares are up 7.65 per cent or 83.50p to 1,175.50p today, while Barratt shares are up 6.25 per cent or 26.50p to 450.80p. 

Taylor Wimpey shares are also faring well, up 6.01 per cent or 6.55p to 115.45p, while Bellway shares are up 5.76 per cent or 120.00p to 2,204.00p. 

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: ‘Housebuilders are among the gainers in early trade, following on from a strong performance yesterday after Kantar data showed food inflation slowing. 

‘Sentiment surrounding housebuilders has been hinging on the direction of inflation and interest rates, and concerns that affordability is being sideswiped as mortgages become much more expensive, so any signs that homeowners might show more resilience is being welcomed.’

Earlier this month, Barratt warned it may build at least 20 per cent fewer homes this year.

From 17,206 in the year to end of June, Barratt expects to build between 13,250 and 14,250 new homes this financial year.

It said last week: ‘Looking ahead, we recognise that there are significant macro-economic headwinds, most notably persistent inflation and a higher interest rate environment, which will impact UK economic growth, employment, consumer confidence and spending.’

Last month, Bellway said volumes were expected to dip this year and into 2024 as bosses cautioned over the potential further impact of cost-of-living pressures and higher interest rates.

But, the FTSE 250 company told shareholders it reported a ‘sustained improvement’ in demand over the spring, compared with a ‘challenging’ end to last year.

UK consumer prices are still increasing at a faster rate than in most other wealthy countries. 

Borrowers continue to be hammered by higher interest rates and, at time of publication, markets are split on whether base rate will peak at 5.75 per cent or 6 per cent by the end of 2023.

On Tuesday, Halifax increased its mortgage rates by as much as 0.6 percentage points with several of its fixed products now over 7 per cent as lenders continue to price in the likelihood of further rate increases. 

Many prospective buyers, particularly first-time buyers, face an uphill struggle amid high property prices and higher interest rates on mortgage deals. 

This post first appeared on Dailymail.co.uk