Housebuilders slump due to poor sales outlook

House prices in February were 1% below the same month last year as slowing buyer demand has put average house prices into reverse. Mortgage borrowing continues to decline as the number of new mortgages for February dropped to the lowest since 2009 during the post-financial crisis housing crash. Average mortgage rates have fallen significantly since the spike following last autumn’s disastrous mini-budget, but they remain elevated and this, combined with high inflation, is severely restricting demand.

The UK’s housebuilders are feeling the effect of falling prices and low demand. Persimmon said sales of its new build homes could drop by 40% in 2023 and Taylor Wimpey says sales could drop from 14,000 to 9,000 as buyers been priced out of the market by inflation and high borrowing costs. The poor outlook has dragged on share prices, with Persimmon down around 11% and Barratt Developments and Taylor Wimpey down between 3% and 4%. This has reversed some of the recent recovery of building stocks after a difficult 2022. 

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