Investing in UK Housebuilder Shares
As with many industries, housebuilders have had a challenging time over the last couple of years. However, many UK housebuilder shares offer market-beating dividend yields, possess strong balance sheets and could stand to benefit from falling interest rates in 2024.
But does it make sense to invest in UK housebuilders? Or are the headwinds too severe? In this article, we take a look at 3 of the top UK house builder stocks.
Table of Contents
Investing in UK House Builder Stocks
The economic conditions of the last couple of years have made things difficult for housebuilders, which has been reflected in share prices.
High inflation means that the cost of raw materials has risen, which results in increased building costs for housebuilders. Unless this increase in input costs is matched by an increase in sale price, this has the effect on squeezing profit margins, something which has evidently been a problem for builders recently.
Furthermore, high interest rates have dampened demand in the housing market, which in turn has impacted sales. High rates increase the cost of borrowing, making it more difficult for people to obtain mortgages, and, consequently, have led to a slowdown in demand.
Subsequently, completions and sales are down amongst the UK’s housebuilders. There is likely to continue to be short-term volatility in the housing market and it is unclear when these headwinds will end. Although there is a widely held expectation the Bank of England will start cutting rates in 2024, they are likely to remain elevated throughout the year. But what about the long-term picture?
The fact is, the UK faces a housing shortage. Demand for houses outstrips supply and, with the UK population forecast to continue growing, this demand isn’t going to simply disappear. Consequently, UK housebuilders have a long-term opportunity to help plug the housing shortfall, whilst simultaneously capitalising on it.
Top UK Housebuilder Shares to Watch
So, what are the best UK house builder stocks to watch in 2024? In the following sections, we will take a look at 3 of the top UK housebuilder shares from the FTSE 100.
Persimmon
Of the three UK housebuilders shares we’ll highlight in this article, Persimmon is the smallest by market capitalisation. After a poor performance in the stock market in 2022 and 2023, Persimmon was briefly relegated to the FTSE 250, before re-entering the FTSE 100 at the beginning of 2024.
In 2023, completions fell by 33% but forward sales for 2024 are ahead of last year. The builder further predicts that moderating building costs should provide a boost to completions this year.
With an average selling price of around £256k in 2023, Persimmon sells the cheapest homes amongst the UK’s housebuilders, which is something that’s likely to play to the company’s advantage in the current economic climate.
At the time of writing, Persimmon shares have a dividend yield of 4.25%.
Taylor Wimpey
Taylor Wimpey is currently the largest UK housebuilder in terms of market capitalisation.
Completions dropped sharply in 2023, 30% lower than the previous year, and its order book also decreased year on year. However, the company notes that enquiries for 2024 have been positive and it is encouraged by recent reductions in mortgage rates.
The housebuilder has a fairly generous dividend policy, which aims to distribute around 7.5% of its net asset value each year to shareholders. Currently, Taylor Wimpey shares have a dividend yield of 6.74%.
Barratt Developments
Barratt Homes is currently the second largest housebuilder in the UK by market capitalisation but the largest in terms of annual completions.
Barratt made headlines at the beginning of February, when it announced that it intended to take over its smaller rival, FTSE 250 constituent Redrow. The deal, which values Redrow at around £2.5 billion, will see Barratt add an additional 24,565 building plots to its existing 63,614.
The post-acquisition company, which will be newly christened “Barratt Redrow”, aims to deliver more than 22,000 homes a year in the medium term.
In the six months ended 31 December 2023, Barratt’s completions dropped by 28.5% and the housebuilder expects to deliver a total of between 13,500 and 14,000 completions in the full year which will end 30 June 2024. At the top end of this forecast, this would represent an 18.6% drop in completions compared to the previous year.
At the time of writing, Barratt shares have a dividend yield of 5.85%.
How to Invest in UK Housebuilders
With an investing account from Admiral Markets, you can buy all of the UK housebuilder shares examined in this article. In order to get started, follow these steps:
- Open an Invest.MT5 account.
- Log in to the Dashboard.
- Open the web trading platform.
- Search for UK housebuilder shares and click the symbol to open a price chart.
- Create a new order, enter the volume and click buy to send the order to market.
Investing with Admiral Markets
As well as the stocks examined in this article, an Invest.MT5 account allows you to buy shares in more than 4,500 other companies and over 200 Exchange-Traded Funds (ETFs) from around the world. Click the banner below to register for an account today:
FAQ
Who is the largest housebuilder in the UK?
At the time of writing, Taylor Wimpey is the largest UK housebuilder by market capitalisation. However, once Barratt Developments completes its acquisition of Redrow, they are likely to steal this top spot.
INFORMATION ABOUT ANALYTICAL MATERIALS:
The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admiral Markets investment firms operating under the Admiral Markets trademark (hereinafter “Admiral Markets”) Before making any investment decisions please pay close attention to the following:
- This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
- Any investment decision is made by each client alone whereas Admiral Markets shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
- With view to protecting the interests of our clients and the objectivity of the Analysis, Admiral Markets has established relevant internal procedures for prevention and management of conflicts of interest.
- The Analysis is prepared by an independent analyst Roberto Rivero, Freelance Contributor (hereinafter "Author") based on personal estimations.
- Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis.
- Any kind of past or modeled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admiral Markets for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
- Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.
