Housebuilding shares jump as UK inflation falls

Housebuilding shares were higher on Wednesday after UK inflation fell to 3.9% in November. The news was welcomed by investors in interest rate sensitive sectors, including housebuilders and retailers.

“Inflation data brings good tidings. In the aftermath of this year’s economic downturn marked by sluggishness and lacklustre performance, the latest inflation figures bring a glimmer of hope to UK businesses, setting the stage for a more optimistic and merry start to 2024,” said Douglas Grant, Group CEO of Manx Financial Group.

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The data suggests the Bank of England will cut rates early next year. The ailing UK property market is in desperate need of a boost after years of rising mortgage rates.

Persimmon shares rose 1.2%, Taylor Wimpey added 0.5%, and Barratt Developments ticked 0.5% higher.

The housebuilding sector had started the day considerably higher before the rally faded as the session progressed.

Companies supplying the construction trade also received a boost; Howden Joinery and Marshalls rose just under 1%.

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Falling inflation will also help bolster household spending power, although analysts warned there is no quick fix for the pressures on households in the coming months.

“While this is a step in the right direction, officials are forecasting that we’ll continue to see similar levels of inflation in 2024. This means it’s likely we won’t reach the Government’s 2% target until 2025 – a year later than originally expected – so households who have had consistent strain on their pockets in recent months will see this continue,” said Gina Silvester, Chief Operating Officer at wealth app Chip.

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