Housebuilders set to report amid soaring interest rates

After their shares soared on the Government’s decision to relax environmental rules, three housebuilders are preparing to update shareholders next week. Vistry, Barratt Developments and Berkeley Group will all update shareholders during the week, as nervous investors will be looking for more indications of what is happening in the mortgage market. Vistry has already said it expects underlying revenue to more than double to £930 million when it reports its first-half results on Thursday. This is largely because of the company’s acquisition of Countryside, which is included in this data for the first time. Housebuilders have proven to be super-sensitive to interest rate speculation given that high mortgage payments are having a significant dampening effect on the market Susannah Streeter, Hargreaves Lansdown ‘But, with recent increases in interest rates and mortgage costs, challenges look set to mount for buyers,’ said Aarin Chiekrie, equity analyst at Hargreaves Lansdown. ‘Investors will be keeping an eye out for updates to the full-year outlook, which had been expecting underlying pre-tax profits to land in above £450 million.’ He said shareholders will also want to know what is happening to Vistry’s balance sheet. Last time they got to peek behind the scenes investors were told that the company, which previously had £115 million in net cash, now had net debt of £330 million. Vistry’s results come a day after Barratt Developments will release a trading statement to the stock exchange on Wednesday. All the housebuilders are facing some of the same pressures. The Bank of England’s base rate has soared from 0.1% in December 2021 to 5.25% today. This has made it significantly more costly for potential house buyers to borrow money, and had an unsurprising knock-on effect on the housing market. ‘ Housebuilders have proven to be super-sensitive to interest rate speculation given that high mortgage payments are having a significant dampening effect on the market,’ said Hargreaves Lansdown’s head of money and markets Susannah Streeter. ‘Barratt Developments has been hit by the triple whammy of higher borrowing costs, the closure of the Help to Buy scheme and a 49% drop in first-time buyer reservations.’ She added: ‘Forward sales guidance will be watched closely given the tricky economic environment. Investors will also be keen to see what’s happening with average selling prices. They were being pushed higher by an increased proportion of London completions.’ Ms Streeter said investors will also be eyeing the forward sales of London-focused Berkeley Group, which will release a trading statement on Friday September 8. The company will benefit from the Government’s plans to ease the rules on nutrient neutrality, she said. ‘The exemption of their housing from requirements designed to limit harmful chemicals being discharged into waterways will mean plans for new developments are likely to be waved through more quickly,’ Ms Streeter said. ‘This has helped sentiment towards Berkeley a little amid hopes it may ease blockages in the company’s development pipeline. Also, the group’s focus on London and its higher-end product should keep it a little more resilient amid the housing market headwinds, it won’t be immune to the increased caution.’