Housebuilder shares yo-yo as investors react to stamp duty cut

Shares in UK housebuilders were initially boosted on the news of the stamp duty cuts announced in today’s mini-budget.

Housebuilder shares moved higher following the mini-budget, in which chancellor Kwasi Kwarteng announced that stamp duty will be cut.

The news initially gave housebuilders shares a boost, with Persimmon (LSE:PSN), Barratt Developments (LSE:BDEV), Taylor Wimpey (LSE:TW.) and Berkeley Group Holdings (LSE:BKG) all advancing between 2% to 3%.

However, at the time of writing (10.45am) those gains had largely been given back.

• Discover: How to buy Shares | Free regular investing | Super 60 Investment Ideas

While there was plenty of speculation ahead of Kwarteng’s speech that a stamp duty cut was on the cards, there was a lack of detail regarding what would change and when it will be implemented.

Today, it was announced by Kwarteng that the threshold on how much a property has to cost before stamp duty is paid will rise from £125,000 to £250,000. The next £675,000 (the portion from £250,001 to £925,000) will be taxed at 5%, then 10% for £575,000 (the portion from £925,001 to £1.5 million), and then 12% for the remaining amount for properties above £1.5 million.

First-time buyers have also been given a hand. Previously, there was no stamp duty payable on £300,000, but this has now risen to £425,000.

All stamp duty changes are permanent and effective from today.

• The investments that will keep growing – even during a recession
• The funds set to benefit from Liz Truss’ spending splurge
• Don’t write off housebuilders, investors urged
• ii view: Berkeley Group aided by London exposure
• Stockwatch: is this the UK’s best-placed housebuilder?
• ii view: high yielder Persimmon battling economic headwinds

In 2022, the sector has been under the cosh due to higher interest rates and fears of a recession.

Richard Hunter, head of markets at interactive investor, points out that despite share prices climbing higher today following the stamp duty cut announcement, the sector remains deeply out of favour with investors.

He points out: “An increasingly toxic combination of fears of persistent inflation, the propensity of consumers to buy given the tightening economic environment and a rising interest rate environment, which puts further pressure on affordability, have all played a part. In turn, should this filter through to lessening demand, any decline in average selling prices would remove a plank which has enabled the housebuilders to mitigate most of the inflationary impact so far.

“In addition, supply chain constraints and a generally dour outlook on UK economic prospects complete the mix, despite the fact that for the most part the housebuilders continue to deliver and that there remains an undoubted lack of sufficient housing in the UK.

“Despite the FTSE 100 constituents having risen by anything up to 3% on the news today, the stark reality is put into focus on a one-year view. Persimmon shares have fallen by 49%, Barratt Developments 39%, Taylor Wimpey 36% and Berkeley Group 20%.