Rumours of Help to Buy demise send housing giants sliding
SPECULATION that the Government will begin to taper or even ditch the Help to Buy scheme sent housebuilders sliding on the FTSE 100 yesterday, as fears mounted that future earnings are built on sand.
Persimmon, the most exposed stock on the blue-chip index to any changes to the scheme, with 50pc of its sales using Help to Buy, plummeted close to 7pc in intraday trade. The Government flatly denied the press reports, which speculated that the scheme could be altered before the original 2021 end date, calling them “simply incorrect” but the sell-off highlighted housebuilders’ sensitivity to the policy.
The Government says it will work with the housebuilding sector on the scheme’s future, recognising the need for certainty on the policy, which underpins around 30pc of new house sales. Help to Buy is believed to have provided a 15pc boost to volumes in the sector.
Gregor Kuglitsch, a UBS analyst, estimated that, even when discounting the potential impact to volumes, ending the scheme would have at least a 10pc impact on earnings.
Despite the Government’s rebuttal, Barratt Developments slid 29p to 589p, a 4.7pc drop, while peers Persimmon and
Taylor Wimpey pared some early losses to slump 102p to £24.64 and 7.3p to 187.9p respectively. With under 5pc of its private completions using Help to Buy, FTSE 250 housebuilder Berkeley edged up 8p to £35.44.
With two thirds of Help to Buy sales not actually needing the scheme, the markets overreacted to the report, broker Jefferies said.
The idea that this “wonder drug” policy is the “difference between the subdued second-hand housing market and the booming new-build one” is a mistake, it told clients.
The overall FTSE 100 index closed 36.94 points higher at 7,511.71, after enjoying an afternoon rally inspired by sterling sliding against the dollar following another month of expectation-beating job figures stateside.
Elsewhere, investment supermarket Hargreaves
Lansdown tumbled 36p to £13.47 after surprising shareholders by ditching its special dividend for the first time since listing a decade ago. Hargreaves said it was notified by the City watchdog that it will be reassessing its regulatory capital requirement due to the company’s “recent growth in scale”. British American Tobacco extended its winning streak to a fourth day, gaining 53p to £50.57, after broker Investec upgraded the tobacco giant to “buy”, telling clients that any effects from the FCA’S recent announcement would likely have no impact on anything but long-term estimates.
Finally, on the FTSE 250, gold miner Centamin slipped 11.5p to 155.2p after Numis analyst Jonathan Guy downgraded the stock to “hold” following its interim results. Mr Guy questioned the company’s “growth through cash flow” strategy, arguing that further expansion is more likely to come through acquisitions.