HOUSEBUILDERS IN NEG­A­TIVE TER­RI­TORY

Shares - - TALKING POINT -

Lon­don-listed housebuilders are al­most ex­clu­sively fo­cused on the UK and their share prices are heav­ily tied to what hap­pens with the Brexit process.

The re­lief of­fered by a suc­cess­ful deal with the EU would not fully solve the is­sues they face, even if that could pro­vide a sen­ti­ment­driven boost to housebuilding stocks.

The in­dus­try faces an un­help­ful com­bi­na­tion of flat or falling house prices, partly driven by eco­nomic uncer­tainty but also a con­se­quence of the reg­u­la­tory im­pact on the buy-to-let space.

Fur­ther­more, ris­ing costs are weigh­ing on the sec­tor in­clud­ing labour as the avail­abil­ity of work­ers is likely to be af­fected by what­ever form the UK’s exit from the EU takes.

Some housebuilders are trad­ing on dou­bledigit div­i­dend yields which is typ­i­cally a sign that the mar­ket doesn’t be­lieve the div­i­dend or earn­ings fore­casts.

How­ever, some ex­perts be­lieve now is a good time to reap­praise the sec­tor fol­low­ing sig­nif­i­cant share price de­clines this year.

For ex­am­ple, the man­agers of Stan­dard Life In­vest­ments UK Eq­uity Un­con­strained (B79X967) and Mer­can­tile In­vest­ment Trust (MRC) both high­light Bell­way (BWY) as an un­der­val­ued op­por­tu­nity. Wes­ley McCoy from Stan­dard Life de­scribes it ‘one of the best op­er­a­tors in the mar­ket’. (TS)

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