Housebuilder shares fall as property prices finally drop

Asking prices across the UK slipped 0.8% this month, but it could just be a summer slump.

by Rachel Savage
Last Updated: 27 Mar 2015

Brits sweating in the mini, muggy heatwave in the last week weren’t the only ones in need of cooling down. Booming house prices, cited by Bank of England governor Mark Carney as the biggest threat to the economic recovery, were clearly in need of a dousing too.

All the fretting and doom mongering seems to have had an impact at last, though, as asking prices across the country slipped 0.8% in July, according to property website Rightmove. Good news for buyers – not so much for housebuilders, who all saw their shares tumble this morning.

Average asking prices fell £2,116 to £270,159, while annual price growth shrank from 7.7% to 6.5%. The biggest declines, of 1.9%, were in the north and east midlands, but even foreign-buyer fuelled London ticked down 0.4%.

Stricter mortgage eligibility criteria and speculation interest rates could be hiked at the start of next year have helped to dampen demand, but the drop could just be a seasonal blip – house prices have fallen in July for six of the last 10 years, Rightmove said.

‘A price fall in July is not unexpected as prospective buyers turn their attention to the summer holidays, not to mention the added distraction of an engaging World Cup,’ Rightmove director Miles Lewis said.

The possibility the fall could be temporary didn’t stop housebuilders’ shares taking a hit this morning. Redrow, Persimmon and Berkeley Group were all down around 1% in mid-morning trading, while Barratt dropped 1.6% and Crest Nicholson plunged 2.1%.

Interestingly, the report noted Help to Buy had helped boost the housing market last year, but the largest group of buyers was now third-timers, who would ensure ‘the musical chairs of trading up and down will continue in the second half of the year’.

If the housing market is taking more than a pause for breath, though, Carney and the Monetary Policy Committee crew may not need to raise rates so soon after all.

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