Britain’s listed housebuilders have so far cancelled or postponed £2bn in dividends and drawn down untapped credit facilities of some £1bn, with on-site operations grinding to a halt as coronavirus spreads through the country.
Persimmon cancelled its 125p per share April dividend and postponed its 110p per share July dividend, at a combined value of roughly £750m, in a trading update on Wednesday.
Earlier in the month, Berkeley said it would no longer increase its own dividends by £455m. Taylor Wimpey axed two dividends of a combined £485m and drew down a new £550m revolving credit facility, and Barratt cancelled £100m in payouts.
In a trading update, Berkeley said: “There is no recent historic precedent and for this reason it is absolutely right for any responsible business to approach the next six months with a reduced risk appetite and a heightened sense of caution.”
Ten housebuilders in the FTSE 350 have cancelled or postponed upcoming shareholder payments, with Bellway, Countryside, Crest Nicholson, McCarthy & Stone, Redrow and Vistry Homes announcing such moves.
With prospective buyers unable to view and buy homes as a result of the lockdown, and the potential hit on earnings, as well as the mortgage implications of RICS valuations, builders are bracing themselves for a downturn.
“The appetite for land from the volume housebuilders directly reflects visitor numbers and reservations in their sales outlets,” said Oliver Knight, residential research associate at Knight Frank.
“There is anecdotal evidence that some of the traditional volume housebuilders are deferring land purchases until more clarity emerges,” he adds.
“When we eventually get decent data for the next couple of months, it will show that activity has absolutely collapsed, possibly beyond anything we have ever seen before,” said Neal Hudson of Residential Analysts.
But listed housebuilders are in a good position to weather this storm, added Hudson. “They’ve not been over-committed on land, they have been making a lot of profit and there is a lot of margin for them to continue delivering homes.”
He said the government looks to the sector to lift the economy, and may step in with a combination of support through renewed initiatives like Help to Buy on top of more radical moves.
“If the consumer doesn’t step in and start buying again, we might see the government being more tolerant of rented tenures and happier to step in and provide more funding,” said Hudson.
“The government will be looking to them quite heavily to get the market going again. It will be difficult and the cost of doing nothing is not zero.”
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