Housebuilders have been on an upswing ever since City folk finished their last turkey sandwiches on Boxing Day
Although Persimmon has been the only one to make a statement, it has not been the only one to make share price gains – far from it. Despite positive analyst reaction, it has not even been the biggest winner, with Barratt rising 19% since 27 December. Even Berkeley Group, seen recently by many City watchers as somewhat overvalued, has risen 4%.
In the absence of much concrete or surprising data on house prices in recent weeks, analysts have put the rise down to the lead-up to the traditional spring selling season. Rachel Waring, an analyst at Panmure Gordon, says housebuilders have outperformed the stock market in the first quarter in 23 of the past 25 years. Apparently, as the market returns to life after the Christmas break, simple human nature tends to lead to more activity than one would rationally expect, and share prices rise as companies sell more homes.
None of the analysts have altered their general view that a well-run housebuilder should trade at somewhere around the value of its net assets at the moment.
Whether this rise is short-lived will depend on two things. First, avoiding any nasty shocks in the rash of statements this week and next. Bovis, Barratt, Taylor Wimpey and Bellway were all due to report in the coming days. If any of these suggest all is not well, then confidence could evaporate quickly. Then again, when was the last time housebuilders conflicted vastly in their reading of the market?
Second, and more fundamentally, there is the spring selling season itself. This we won’t have a sense of for at least another month. And although house prices could do anything this year from rise by 4%, according to agent CBRE, to fall by 10%, according to Capital Economics, most analysts agree that housebuilders are likely to see more transactions, as mortgage lending slowly eases. How profitable those sales are remains to be seen.