House Builders in Focus As House Prices Rise

House prices are on the rise yet house builders remain depressed.

Charts (4)

House prices are on the rise, at least for now. According to Nationwide’s house price index, house prices rose 1.7% in July offsetting at -1.6% fall in June. On an annual basis house price growth recovered 1.5% from -0.1% last month.
RICS also reported that their house price gauge turned positive for the first time since the start of the coronavirus crisis.

Why are house prices rising?
There are three factors supporting house prices in the near term. Firstly, the stamp duty holiday announced by Chancellor Rishi Sunak, which is due to conclude in March next year. Secondly as people reassess their home needs in light of lockdown and the coronavirus pandemic they are looking to move. Thirdly pent up demand. 

However, there is a risk that these factors prove to be a false dawn. We saw earlier in the week that labour market conditions in the UK are weakening as a result of the coronavirus pandemic and as government support is slowly withdrawn. Expectations are for unemployment to reach 7.5%, it currently sits at 3.9%. If, as expected, the labour market does weaken considerably then we can expect this to dampen activity in the housing market in the coming quarters.

Let’s not forget the Help to Buy scheme. This has possibly been one of the most supportive factors of the housing market and house builder stocks since it began. The government has announced an extension to the scheme, but only by two months until March 2021. This is just a few months after Brexit and is when the stamp duty holiday is due to end. 

House prices are rising but house builders remain depressed, as dark clouds gather on the horizon. We are still in very early days of the economic recovery is the next few months will be crucial for both the labour market and the housing market.

Bellway
Bellway reported earlier in the week, announcing that it expects profits to fall in 2020 and beyond owing to the coronavirus crisis, which led to reduced productivity and higher costs. Housing completions fell 31% however there are signs that demand is slowly picking up. The dividend will only be returned when Bellway consider that there is sufficient clarity on the economic outlook.

Chart thoughts
The rally from the mid-March low has stalled. After picking up from 1735 to a recent high of 2035p in early June, the share price has come under mounting pressure. Trading below its 50, 100 and 200 daily moving averages on the daily chart and below its ascending trendline, suggesting there could be more downside on the cards.
Support can be seen at 2320p yesterday’s low. A break through here could see the door open to 2200p a level last seen in April. 
On the flip side, resistance can be seen at 2530p the 100 sma, 2575p ascending trendline and towards 2750p

More from Equities

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.