Sector movers: Homebuilders continue lower, with Brexit and political uncertainty in focus

The drag from homebuilders saw the top flight index underperform its peers both in the States and over on the Continent, as the Bank of England sounded a cautious note about the impact that the referendum on EU membership might have on the sector, coinciding with a flurry of downbeat remarks from analysts.

In the minutes of their 13 April policy meeting, rate-setters at the Old Lady on Threadneedle Street said uncertainty surrounding the 23 June Brexit vote was already having an impact on the UK economy and the real estate sector.

Stock in Persimmon finished the session down by 5.99% at 1,900p, while that in Barratt Developments lost 3.96% to 521p. Berkeley Group Holdings shares were 3.72% lower to 2,976p.

“There are some signs that uncertainty relating to the EU referendum has begun to weigh on certain areas of activity, as some decisions, including […] commercial property transactions, are being postponed pending the outcome of the vote,” the minutes read.

Earlier in the day, RICS said its widely-tracked house price index, for the month March, hit +42, for a nine-month low and down from the reading of +50 in the month before.

“Elections inevitably bring with them periods of uncertainty in the market, and our figures would suggest that next May’s devolved elections [in Scotland and Wales] are no exception. Likewise, the EU referendum, is likely to be an influencer in terms of the damper outlook for London in particular,” said Simon Rubinsohn, chief economist at RICS.

Nonetheless, over the longer-term prices were still forecast to rise by 4.0% each year for the next five years across England and Wales, RICS said.

Cautious comments from analysts were an additional factor weighing on the shares of Persimmon, in particular.

Analysts at Numis described the homebuilder’s latest trading statement, published on Thursday, as “robust” with year-to-date revenue up by 8.0%.

Nonetheless, for at least a couple of years they no longer expected the company’s capital return plan to continue to grow.

“The risks are rising for the house builders largely due to high house price inflation and its potential impact on policy and we remain concerned about the longer term sustainability of the very favourable market conditions and the higher returns and financial benefits the house builders have been able to extract from this,” ShoreCap’s Robin Hardy said in a research note sent to clients.

In parallel, market commentary was referencing remarks from analysts at UBS about the dark clouds hanging over the sector due to the referendum.