MARKET REPORT: Budget battering goes on for Britain’s builders amid fears of upper rates of interest

House prices may be rising, but investors continue to dump shares in the biggest builders.

Upbeat figures from Nationwide show prices last month were 3.7 per cent higher than a year earlier – the largest increase since November 2022. 

A typical home now costs just over £268,000, according to the mortgage lender, which noted that activity in the market has been ‘relatively resilient in recent months despite the higher interest rate environment’. 

But it has done little for share prices with investors worried about what those higher interest rates mean for demand for new homes.

While the Labour Government has pledged to boost development across the country, few believe it will achieve the 1.5m new home target for this parliament.

And shares in the sector have tanked since the Budget, which has pushed up borrowing costs as markets digested Chancellor Rachel Reeves’s tax and borrowing-fuelled spending spree.

Property market: Upbeat figures from Nationwide show house prices last month were 3.7% higher than a year earlier – the largest increase since November 2022

Analysts at RBC believe the shares have been ‘oversold’ and say the underlying picture is not as bleak as all that.

But while they upgraded Barratt Redrow and Crest Nicholson, they cut their ratings on Persimmon, Vistry and MJ Gleeson.

Persimmon shares fell 1.3 per cent, or 16.5p, to 1241.5p, taking losses since the Budget to 22 per cent.

Vistry – whose own problems have been highlighted by two recent profit warnings – dropped another 3.9 per cent, or 25.5p, to 630.5p. 

It is down more than 50 per cent since mid-September. Taylor Wimpey (down 1.4 per cent, or 1.85p, to 129.15p) was caught up on the sell-off and has fallen 18 per cent since the Budget.

Gleeson lost 1 per cent, or 5p, to 501p while Barratt inched up 0.3 per cent, or 1.3p, to 429p and Crest advanced 3.8 per cent, or 6.3p, to 171.6p.

With political uncertainty in France in the headlines, it was a jittery start to the week, with the FTSE 100 adding just 0.3 per cent, or 25.59 points, to 8312.89 and the FTSE 250 edging down 0.01 per cent, or 2.52 points, to 20769.05.

Direct Line remains in focus after it last week turned down a £3.3billion bid from insurance giant Aviva. 

Over the weekend, Direct Line founder Sir Peter Wood told The Mail on Sunday that Aviva boss Amanda Blanc would have to rise the bid by ‘several hundred million pounds’ to succeed. 

He bemoaned what has happened to the company since he left saying ‘it’s sad it’s been run so badly’, and added that chief executive Adam Winslow needs more time.

‘He is trying to do a good job but it’s a three- or four-year job,’ said Wood.

Winslow was also making representations, telling The Sunday Times the group ‘is making excellent progress in the early stages of a significant turnaround’.

Having jumped 48 per cent in two days after the bid became public last week, Direct Line shares fell 1.2 per cent, or 2.8p, to 232p yesterday and Aviva slid 0.1 per cent, or 0.5p, to 483.2p.

Shares in British telecoms firm Spirent Communications rose 3.8 per cent, or 6.5p, to 177.8p as its proposed takeover by US firm Keysight moved a step closer with regulatory approval in the UK, France and Germany.