Shares in FTSE 350 housebuilders fell 6.1% by midday today amid turmoil in the government over the draft EU withdrawal agreement.
Bovis Homes was the hardest hit among the housebuilders, falling 8.3%, although nearly all of them dipped at least 5%. The only exceptions were Bellway (-3.9%) and Galliford Try (-2.2%).
The falls come amid a chaotic morning in government as Dominic Raab, the Brexit secretary, resigned over the details of the agreement.
Others, including Esther McVey, the work and pensions secretary, soon followed, while letters of no confidence in prime minister Theresa May were reported throughout the afternoon.
Housebuilders vulnerable
The wider market was relatively stable with the FTSE 100 up 0.1% and the FTSE 250 down 1.1%. Part of the reason is that the pound fell more than 1.7% against the euro, which gives international companies listed in London a boost due to sterling being cheaper.
Even within property, REITs and other real estate investment firms fared better, falling 2.4% on average. The worst hit were CLS (-5.3%) and Intu (-4.7%).
Neal Hudson, director at Residential Analysts, said housebuilders are particularly vulnerable to anything that might affect the economy.
Hudson said: “They are focused purely on the domestic market. They are not like many of the companies in the FTSE 100 that operate internationally and might benefit from the pound falling.
“They’re very much dependent on people being able to and wanting to buy new homes.”
No-deal scenario
Given the opposition to the prime minister’s draft agreement, the growing fear of a no-deal Brexit scenario, which could lead to a rise in inflation and interest rates, has spooked investors. Any shock to the economy would dampen people’s ability to buy new homes.
But that prospect is nowhere near as worrying as the results of the referendum two years ago were, when shares in those same housebuilders fell 23.6% on 24 June and 16.5% the following Monday, 27 June.
Still, this morning marked the worst performance since the referendum for Taylor Wimpey and Persimmon, and the second worst for Redrow, Berkeley, and Countryside.
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