Property & Construction Daily

The Property & Construction Daily provides a sector-specific comment from leading analyst Alastair Stewart. His daily perspective provides a round-up of market statements, news, economics and views from the property and construction sectors.

July 19, 2023

House prices steady and positive inflation numbers | SPR, WJG

Company research

Springfield Properties (SPR, 65p, £76m mkt cap) – SPR is a client of PERL

Scotland’s only quoted housebuilder. Trading update. See our research note: ‘In-line’ results in face of multiple challenges:

“Springfield’s FY23E period-end trading update confirms that profits will be in line with expectations despite challenging UK economic conditions and specific headwinds in the affordable housing and private rental sectors in Scotland. However, the group has cautioned on the near-term outlook in the private sales market. For now, we maintain our FY24E forecasts until greater visibility emerges at the September results on the private market and, possibly, more supportive policy on affordable housing.”

 

Watkin Jones (WJG, 77p, £198m) – WJG is a client of PERL

Residential for rent developer and manager in the build-to-rent (BTR) and student accommodation sectors. Trading update and Board change. See our research note:  Transaction risks cloud current outlook:

“Watkin Jones has issued new guidance for FY23E, recognising “a greater degree of risk” regarding anticipated forward funding transactions completing by the 30 September year-end, with lower profitability also expected for FY24E, while it has identified other impairments and charges. We have downgraded our estimates accordingly. CEO Richard Simpson has stepped down and CIO Alex Pease has taken the role on an interim basis.”

Economic data

Housing prices. Average UK house prices increased very slightly M/M to £286,000 in May, having risen by 0.6% between March and April, while the Y/Y increase dropped to 1.9%, down from a revised 3.2% in April, according to the latest ONS figures. The data (the most comprehensive survey, taking in cash as well as mortgaged transactions) shows prices dropped by a total of 2.9% between the peak in September (mini-budget) and the recent low in March. Average house prices increased over the 12 months to May, to £304,000 in England (+1.7%), £213,000 in Wales (+1.8%), £193,000 in Scotland (+3.2%) and £172,000 in Northern Ireland (+1.6%). The North East saw the highest annual percentage change of all English regions in the 12 months to May 2023 (4.0%), while the East saw the lowest (0.0%).

Viewpoint: This data comes alongside better than expected June inflation data, pushing up housebuilders’ shares today: CPI for down to +7.9% from May’s disappointing +8.7% and lower than consensus of +8.2%; core inflation, +6.9% vs consensus of +7.0% and May’s +7.1%. My prediction – it took the housing market about three months to work through the shock of the mini-budget; about three months in spring to rebound on better lending rates; the latest weakness from the May’s bad inflation data could fade in the same three or four months, leading to a better market (at least for transaction volumes) by the time the holidays are over in September …

Average house prices per country
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