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Optimism ahead of Persimmon’s trading update

After last week’s comments from Mark Carney the outlook for housebuilders looks a little brighter.

A man securing some scaffolding
Source: Bloomberg

Almost all the UK housebuilders were able to post impressive figures for their last quarterly results, however the shares have predominantly fallen since then. The primary reason for this disappointing performance has been the increasing sentiment that the Bank of England will raise interest rates ahead of time.

Two weeks ago, BoE governor Mark Carney used his Mansion house speech as an opportunity to state that he was surprised the markets had not been fully factoring a rate rise in the near future. This triggered an aggressive move in Sterling as currency traders misread this as an indication that they would start in 2014. Some swift backtracking from Mark Carney early the next week saw calmer heads all round. 

The end of last week once again saw Mr Carney make comments more directly focused on the housing market. As has been the case on a number of occasions, he indicated that he does not think interest rate changes should be used as the primary tool to cool the house price bubble that is forming. Restrictions on the multiples of income that mortgage appliers can use will help, but ultimately less red tape on new developments and the ensuing increase in properties being built will help rectify the situation.

Persimmon, like most housebuilders, has seen a swift bounce in its share price, but will need more in order to convincingly break out of this downward trend it has been in. Closing the gap to early June’s 1330p, which looks likely to coincide with the 50- and 100-day moving averages will be the first hurdle.

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