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Highlights
- The construction sector witnessed a slight decline in growth during April in comparison to March, a survey has revealed.
- Rising inflation and higher cost of borrowing have forced people to postpone their housebuilding plans.
Despite the government relaxing coronavirus-related restrictions and the gradual reopening of the economy, several sectors have seen limited growth. The key reason behind this is the high rate of inflation, which has put significant pressure on the businesses as well as the consumers. Rising input costs mean that businesses will have to eventually pass on these costs to the consumers to maintain profitability.
Among the sectors affected by this is the construction sector. As the cost of energy, fuel, and raw materials has gone up, household budgets have also been impacted. Moreover, the cost of borrowing has also increased with consecutive four rate hikes by the Bank of England (BoE), forcing people to postpone their house building plans.
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As per the S&P Global/CIPS construction purchasing managers’ index (PMI), a monthly survey that gives a score to every sector in accordance with its performance, the construction sector in the UK stood at 58.2 in April, a slight decrease from the 59.1 it scored in both March and February. Notably, a score of more than 50 marks an expansion, while anything below 50 marks a contraction. In terms of sub-sectors, the most resilient were commercial work and civil engineering, while residential construction saw the weakest momentum during April.
Let us take a look at some blue-chip housing stocks and how they have been performing.
Persimmon Plc (LON: PSN)
Persimmon is a British housebuilding company listed on the FTSE 100 index. It reported an underlying profit before tax of £973 million in FY2021, up from £863.1 million in the previous year.
The company has a market cap of £6,689.37 million and its shares closed at GBX 2,039.00, down by 2.67% on 6 May 2022. In the last one year, the stock price has fallen by 36.28%.
Taylor Wimpey Plc (LON: TW.)
Taylor Whimpey is among the UK's largest real estate companies and primarily operates in the UK and Spain. The company has appointed Jennie Daly as its new CEO who will replace Pete Redfern.
The FTSE 100-listed firm has a market cap of £4,538.83 million. Its shares closed at GBX 123.45, down by 2.45% on 6 May 2022. Over the past year, its share price has plunged by more than 31%.
Berkeley Group Holdings Plc (LON: BKG)
The Cobham-headquartered developer builds residential and mixed-use properties and is listed on the FTSE 100 index. In March, the company announced that it has acquired the outstanding 50% interest from utility company National Grid in St William Homes LLP.
On 6 May 2022, the company's shares closed at GBX 4,007.00, down by 2.70%, with a market capitalisation of £4,585.62 million. The one-year returns from the stock stand at -14.34%
Note: The above content constitutes a very preliminary observation or view based on market trends and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.
