Good morning!
There's an interesting article in the Telegraph this morning, saying that Persimmon shares (which I currently hold, currently 1302p) are worth a look, after the recent plunge which has affected the whole housebuilding sector. I agree. After all, people won't stop buying houses in the long run just because of Brexit. There might be some short term impact from people who panic, and cancel a reservation, but in my view that is likely to only be transitory.
Mortgages are extremely cheap right now, and banks are happy to lend on great deals, with e.g. a 5-year fix or cap. Both housebuilders and banks have very much stronger balance sheets now, than in 2008, so I really don't see why things should move into a recession - unless there's some big external shock, e.g. another Eurozone banking crisis - which is a concern. Italy's banks seem to be under strain - the EU has banned short selling on Banca Monte dei Paschi di Siena SpA, usually a bad sign.
A French Govt Minister arguably hasn't helped matters by declaring that the French state is "totally bankrupt" in a recent interview. So who knows, we might be regarding Brexit as a very smart move, if the Eurozone implodes at some point in the future?
Persimmon's update yesterday was positive, although they included the too early to say comment on the impact of Brexit, which seems to be becoming the norm at the moment. This to me implies that there probably has been some short term impact from Brexit, but that it's not a discernible downward trend. Personally, I think the housing market (outside London) is probably going to bounce back. There is so much demand for housing, and affordability based on low mortgage rates, is decent outside of the South East. It's difficult to overstate the yearning of generation rent to own their own home. So once they've got the deposit together, they'll go for it, in my view, regardless of Brexit.
Although there's always the risk of anchoring in this type of market. Most of us tend to make the assumption that stocks were correctly priced before Brexit. However, what if they were actually over-priced to begin with? Then prices might now simply be adjusting down to where they should be, given much more uncertain times. Or they could still be over-priced, who knows?
The trouble is, everything…
