Eyes on housing market outlooks as Taylor Wimpey and Persimmon report
Shareholders are likely to be looking for any indication of what housebuilders Persimmon and Taylor Wimpey think the next year will look like for the sector when they report next week.
The businesses are due to reveal their financial results for last year on Wednesday and Thursday amid a growing sense of unease in the sector.
The housing market is struggling at the moment, with HM Revenue and Customs (HMRC) data indicating that 96,650 homes were sold in January, the lowest since 2015 and 11% down compared with a year earlier.
House prices have also started to cool off, with Halifax data from earlier this month suggesting that the average house sold for more than £12,000 below its August peak in January.
The fear is that the current dip in house prices could be the start of a bigger correction
Aarin Chiekrie, Hargreaves Lansdown
It comes as interest rates have been rising, adding to the cost of taking out a mortgage.
The Bank of England’s base rate has hit 4% – up from 0.1% a little over a year ago – and could rise further still.
“Persimmon’s feeling the pressures of a tough housing market, and the group’s valuation has tumbled around 40% in the last 12 months as a result,” said Aarin Chiekrie, an equity analyst at Hargreaves Lansdown.
“We’ve already heard that ‘notably weaker’ customer demand and higher cancellations pushed full-year forward sales down from £1.6 billion to £1.0 billion in 2022.
“And as the mortgage rate environment remains challenging for home buyers, we don’t expect to hear things picking up in this area.”
He said the results next week will show in more detail how the business is being impacted by rising costs, and how badly they are hitting its profitability.
“But we’re most interested in the outlook statement. The group should give an indication of how forward sales have been at the start of this year, as well as what the rest of 2023 could look like.
“The fear is that the current dip in house prices could be the start of a bigger correction.
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“If that looks like the case next week, there could be a negative market reaction, despite a lot of concerns already being priced in.”
Meanwhile analysts expect revenue at Taylor Wimpey to hit £4.44 billion, up from £4.28 billion a year earlier.
Pre-tax profit is expected to hit £900 million, up from £679.6 million in 2021.
