Housebuilder to drop out of FTSE 100

Housebuilder to drop out of FTSE 100



One of the UK’s biggest housebuilders has been dropped from the FTSE 100.

From 19th September, housebuilder Berkeley Group Holdings will be replaced by precious metals producer Polymetal International Plc in the FTSE 100.

The move follows an 18.5% decline in Berkeley’s share price since the EU referendum on 23rd June. 

FTSE 100

Berkeley was one of four housebuilders listed in the FTSE 100, with Barratt Developments Plc, Persimmon Plc and Taylor Wimpey Plc also featuring.

Despite being the only housebuilder removed from the list, Berkeley was not the only firm to have suffered a fall in share prices.

As of 31st August, Taylor Wimpey had seen its share price fall 16.1% since 23rd June 2016.

Meanwhile, Barratt Developments had suffered a decline of 14.5% and Persimmon stocks have fallen by 12.9% during the same time period.

Brexit

In the days following the EU referendum, housebuilder share prices plummeted.

Though shares have since risen, possibly due to an unexpected 0.6% rise in house prices during August, the housebuilders’ shares are still significantly lower than their pre-Brexit levels.

Last month, real estate adviser Savills found that commercial property activity fell 18% during July.

A poll conducted by Bridging & Commercial Distributor also found that 57% of respondents believed Brexit would hinder commercial property investment in the UK.

Recovery

Despite the declines, John Stewart, director of economic affairs at the Home Builders Federation, told Development Finance Today that the housebuilder market has not been permanently weakened.

"Demand for new homes remains strong,” John claimed.

“After a very brief pause in the days following the referendum, demand quickly returned to pre-referendum levels.

“Every indication suggests that demand will continue to grow, allowing builders to increase supply still further.”

However, in a monthly house price index, Robert Gardner, chief economist at Nationwide, contradicted John’s assertions.

Robert revealed that despite house prices rising, new buyer enquiries had softened as a result of the stamp duty rise in April and uncertainty caused by Brexit.

“The pick up in price growth is somewhat at odds with signs that housing market activity has slowed in recent months,” Robert admitted.

“However, the decline in demand appears to have been matched by weakness on the supply side of the market.

“Surveyors report that instructions to sell have also declined and the stock of properties on the market remains close to thirty-year lows.”

Regardless, John suggested that the country’s lack of housing could catalyse the recovery of the housebuilder market.

“Housing need in this country is acute, the government is focussed on increasing supply [and the] help to buy equity loan is assisting thousands of people a month to purchase a new home,” John said.

“[Furthermore], mortgage availability has recovered and a number of new lenders have become very active in the new build sector, and we have historically low interest rates."

Berkeley Group, Taylor Wimpey and Barratt Developments declined to comment.

Persimmon had not responded at the time of publication.



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