- Housebuilders are known to be 'value traps'
- Dividend payments may have peaked
In the first article in this series on housebuilders, we suggested keeping away from the UK housebuilders for a while yet, but, since then, their shares have surged – some stocks are up by more than 10 per cent in a fortnight.
This is the way with this sector, with extreme reactions (up and down) to macro news and events. This recent surge came on the back of the view that UK interest rates have peaked following the last Bank of England (BoE) Monetary Policy Committee meeting. While base rates may well have stopped rising after 14 successive increases, the BoE still points to rates remaining high, and it is probably optimistic to think that the more pertinent mortgage rates are likely to drop very far or very fast. Perhaps some home buyers have been holding themselves back and could now dip their toes in – this seemed to be underscored by the surprise tick-up of 0.6 per cent in the Nationwide UK house price index in October.