Barrat Developments - Will the London slowdown hit the UK's largest home-builder

Tuesday, 5th February 2019 14:37 - by Rajan Dhall

The housing sector is struggling at the moment with margins and the fallout from the nations capital of London. More recently it seems the housing sector has been buoyant about the governments wait and see approach to Brexit. Kicking the can down the road has provided some stability when it seemed like the chances of a harder Brexit were getting higher. Now according to some financial media sources, the chances of a hard Brexit are around 15%. Help to buy is also in its final stages and the market will be looking to price out the change and check the implications this might have on the company. Lastly, the dividends paid by the Co. are supportive, Barratt paid out £435m last time out

The weekly chart has broken out of the recent trend of lower highs and lower lows pointed out by the trendlines on the chart. This came after the odds of a harder Brexit fell and other companies in the sector performed well. It has also been noted that  Berenberg changed their stance to positive on the UK builders with ‘buys’ on Barratt Developments, Bellway and Taylor Wimpey.

The UK’s biggest homebuilder could surprise with forward sales guidance as they have done in the past but with Help to Buy set to come to an end and Brexit kicking in caution will likely be the tone. There are some key levels on the chart to consider as 590-600p could provide some resistance. On the downside as support, 510p had been used as support mid to late 2016 and in early 2018 there was a strong bounce from 510p to 590p. We may well see a rise tomorrow but unless the government extends the Help to Buy scheme we might have some more pain here.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.