An analyst at JPMorgan Chase & Co. has added his voice to warnings about the outlook for new home sales in the UK as surging interest rates squeeze would-be buyers.
(Bloomberg) — An analyst at JPMorgan Chase & Co. has added his voice to warnings about the outlook for new home sales in the UK as surging interest rates squeeze would-be buyers.
A “potential softening in sales rates from here, given the uncertainty on rates, puts the 2024 volume recovery in jeopardy,” Rajesh Patki wrote in a note to clients. He downgraded Persimmon Plc to neutral, having recommended clients buy the stock for more than three years.
JPMorgan placed peers Taylor Wimpey Plc and Vistry Group Plc on “negative catalyst watch” ahead of interim financial results due over the summer. All three stocks fell more than 2% on Tuesday, before paring their declines.
Affordability issues could result in lower average selling prices, added Patki. The Nationwide Building Society said last week that a decline in UK house prices accelerated in June.
JPMorgan’s comments come after a FTSE index tracking UK homebuilder stocks fell about 10% in the second quarter as the Bank of England hiked its main interest rate to 5%, putting yet more upward pressure on mortgage rates and further fueling the country’s cost-of-living crisis.
“In spite of the sector’s recent underperformance on inflation data and the Bank of England response, we reiterate our cautious stance on the UK Housebuilding sector,” Patki said.
JPMorgan had an overweight rating on Persimmon from February 2020. Since then the stock has lost more than two thirds of its value. The FTSE 350 index of UK stocks has risen about 0.5% over the same period.
–With assistance from James Cone.
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