Warning rocks UK housebuilding sector

The fading of housebuilding as a force in the FTSE 100 index continued today after Persimmon (LSE:PSN) joined the list of evicted stocks and Barratt Redrow (LSE:BTRW) suffered due to a rival’s profit warning.

Valuations across the sector were initially hit after Crest Nicholson Holdings (LSE:CRST) said market conditions had been more subdued than expected through the seasonally quieter summer period.

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The FTSE All-Share company now expects completions for the year to 31 October of between 1,350 and 1,400 units, representing a 5% cut to the midpoint of its previous guidance and well below the range of 1,550 to 1,700 it forecast earlier this year.

The reduction means Crest is on course to report a full-year underlying loss of £10 million, compared with previous hopes for a profit between £5 million and £10 million.

Crest, which offset the downgrade by highlighting faster-than-expected progress with its debt reduction plan, fell 6.7p to trade at a multi-year low of 54.6p.

Barratt Redrow, which will soon be the only housebuilding stock left in the FTSE 100, dropped as far as 297.6p before a recovery to 301.6p. This level compares with 400p prior to the start of the Iran war in February and June’s low point at close to 240p.

Affordability fears have compounded ongoing cost and regulatory pressures after the average mortgage rate recorded by Moneyfacts rose from 4.89% in March to 5.55% yesterday.

The challenging conditions have already cost Berkeley Group Holdings (The) (LSE:BKG) its blue-chip status, with Persimmon due to follow after its relegation from the FTSE 100 was confirmed last night.

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Persimmon shares have fallen 16% this year, with Barratt Redrow 20% lower and brownfield regeneration specialist Berkeley down by 13% at an eight-year low. Taylor Wimpey (LSE:TW.) dropped out of the FTSE 100 last September while the brief stay of Vistry Group (LSE:VTY) ended in December 2024.

Taylor Wimpey, which recently lowered its annual distribution guidance to 4% of net assets from 7.5% previously, is now worth £2.8 billion after a year-to-date 24% fall for shares.

Vistry’s renewed focus on cash generation to bolster its balance sheet means it expects to record a £30 million loss at half-year results on 24 September, when new chief executive Adam Daniels is also due to present a strategic review.

Bellway (LSE:BWY) shares are down 24% year-to-date but up 21% since June, boosted by a strong increase in cash generation in last month’s resilient update for the year to 31 July.

To stimulate demand, Bellway called for an immediate reduction in stamp duty alongside a government-backed deposit support scheme for first-time buyers.

Alongside the impact of affordability constraints, Crest Nicholson today highlighted competitive pricing pressures as its open market sales rate per outlet week fell to 0.35 in the last six weeks compared with 0.48 in the first half and 0.55 a year earlier.

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Pricing pressure has been particularly evident in bulk sales, while build cost inflation has been in line with previous guidance of 3-4%.

Chief executive Martyn Clark said: “While the trading backdrop has remained difficult through the summer, we are making tangible progress on the actions within our control.

“Our cash optimisation programme is delivering with the expected year-end net debt position now materially better.”

The year-end debt figure is now set to be in the range of £70-90 million, an improvement of about £30 million on the previous guidance.

The group said it was in constructive discussions with its lenders to amend its covenants and ensure that it has an appropriate level of funding and liquidity, although it now anticipates some slippage in the current timetable.