U.K. homebuilders fell the most in four months after JPMorgan Chase & Co. said a moderate housing market improvement is already accounted for in their share prices.
The Bloomberg EMEA Homebuilders Index (BEUHBLD) slumped by 2.6 percent, the biggest drop since Sept. 26. Redrow Plc led the declines at 4.3 percent and Barratt Developments Plc (BDEV), the U.K.’s largest homebuilder by volume, fell 3.6 percent. Both were cut to underweight by analyst Emily Biddulph.
The index, composed of the U.K.’s seven biggest publicly traded homebuilders, gained 70 percent last year as higher selling prices and improved margins helped overcome the country’s stuttering economy and a lack of mortgage lending. While some economic indicators show signs of improvement, it’s unclear how those will affect the market, Biddulph wrote.
“The sector is now pricing in a near-term meaningful improvement in housing market conditions,” Biddulph wrote in the note. “Although we continue to see some medium-term value in the sector and see little risk to consensus earnings estimates, we see near-term risk to sentiment.”
Bovis Homes Group Plc was also cut to underweight. Bellway Plc and Taylor Wimpey Plc were downgraded to neutral by the New York-based bank and Persimmon Plc was kept at neutral.
Britain is facing the prospect of a triple-dip recession this year, hurting efforts by potential homebuyers to save for a deposit. Weekly pay growth slowed to an annual 1.5 percent in the three months through November, while pay increases excluding bonuses eased to 1.4 percent, the lowest since June 2010. That compares with an inflation rate of 2.7 percent in December.
Taylor Wimpey remains Biddulph’s preferred stock because of its valuation and its land for building, she said. Shares of the U.K.’s second-biggest homebuilder by volume fell 3.6 percent.
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