UK Housebuilder Stocks Under Pressure – Here’s Why

UK housebuilders Persimmon (LON: PSN), Barratt Developments (LON: BDEV), Taylor Wimpey (LON: TW.), Redrow (LON: RDW), and others came under pressure Monday as the UK housing market continues to feel the effects of the uncertain economic climate.

While the stocks have managed to claw back some of their Monday losses so far during Tuesday's session, the pressure remains, and investor concerns have yet to subside. Here's why:

Property website Rightmove (LON: RMV) revealed on Monday that August saw the average price of a home in the UK fall by 1.9%, the most significant decline in August since 2018.

In addition, RMV said the number of sales being agreed is now 15% lower than “the more normal 2019,” with the number of available properties still 10% lower than at this time in 2019.

Meanwhile, home construction firm Crest Nicholson (LON: CRST) revealed in a trading update that it now expects FY23 adjusted profit before tax to be around £50 million, down from £73.7 million.

Crest Nicholson said that “against a backdrop of persistently high inflation and rising interest rates, trading conditions for the housing market have worsened during the summer of this year.”

“While pricing has remained resilient in a market with limited supply and few distressed sellers, the economic uncertainty is deterring prospective home movers,” they added.

Even though Crest Nicholson remains confident over the next year, the nearer-to-medium-term outlook for the housing market has more pressing concerns. While inflation is easing, it remains high. In addition, consumer wallets are becoming more stretched, as demonstrated by the recent UK retail sales data, which fell by -1.2% in July, compared to an expected -0.5% decline.

The current climate could pressure housebuilders further, despite Tuesday's slight share price recovery.