Barratt Becomes Latest Victim of U.K. Homebuilder Buyer Fatigue

The Canary Wharf financial, business and shopping stands across the River Thames above an advertising hoarding for the Barratt Developments Plc Enderby Wharf residential project construction site in London, U.K., on Monday, Sept. 5, 2016.

Photographer: Simon Dawson

Just as British home buyers are finding costs ever-so-slightly more affordable, the price of housebuilders is becoming an increasing stretch.

Strong trading updates this week from Persimmon Plc, Taylor Wimpey Plc and most recently Barratt Developments Plc have been greeted by falling share prices as buyer fatigue sets in.

After a 44 percent gain in 2017, U.K. housebuilders have been among the worst-performing sectors in the early days of this year. Concerns surround the sustainability of builders’ gross margins in an environment where house prices are softening and construction costs potentially rising. Other jitters include a frail economy and concerns about labor supply in the construction industry following Brexit.

“Builders’ margins have been expanding for years because there has been net price inflation, and now there is danger of a mean reversion in margins,” Robin Hardy, an analyst at Shore Capital, said by phone. “It’s beginning to dawn on the market that’s going to happen. And they’ve had a good run. There is clearly negative momentum.”

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