Housebuilder stocks: Persimmon bounces back with share price rise

While all sectors of the UK economy have taken a beating as a result of the Covid-19 shutdown, the country's £110 billion construction industry has proven to be one of the worst affected in recent weeks.

With economic activity grinding to a halt, and consumer spending reducing to a mere trickle, the UK's biggest housebuilding companies have faced a particularly bleak future as the country's real estate sector has effectively been suspended since late March.

However, messages coming from Persimmon, the biggest housebuilder in the country, this morning suggest that the UK's beleaguered construction sector may finally be reaching a turning point. Let's take a closer look at the situation so far and see why Persimmon has experienced an unexpected bounce as markets opened in London.

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Persimmon assures shareholders of its resilience

Although Persimmon's modest gains when markets opened do not look like they will hold, it's clear that the company has been buoyed by recent reassurances the company made to shareholders. They have released figures this morning showing that the first 11 weeks of 2020 before the lockdown were some of the best in the company's history, with year-on-year sales more than 10% higher than they were at the same time period in 2019.

Perhaps more strikingly, they claimed that, although sales have since fallen, customer inquiries have remained strong, citing this as an indication that the long-term resilience of the industry remains in good shape. In further efforts to reassure shareholders, Persimmon has said that they will be launching a phased return to work for their thousands of employees imminently.

Although the full details of their plans are yet to be released, it has been confirmed that they will be using what they are calling 'Covid-19 Return-to-Work Passports' to identify employees who can safely return to work on their building sites up and down the country.

The company also announced that they have not taken advantage of the UK government's job retention scheme and are currently making no plans to do so. The average cost of a Persimmon home has also continued to grow throughout the year so far, reaching £244,500 per home, compared to £237,850 this time last year.

Will Persimmon's restart be seen elsewhere?

Persimmon's announcement of a phased restart has the potential to ripple through equities markets today, as shareholders will likely be asking whether other companies of a similar nature will be activating such plans.

A return to physical work is something that is decidedly not on the agenda for the vast majority of FTSE-listed companies at the moment, but Persimmon's announcement today may change all of that. Other companies in similar sectors, such as the housebuilding giants Barratt Developments and Taylor Wimpey, may see their own prospects rise if they too begin to consider reactivating their operations in a similar way to Persimmon.

The construction industry is one that largely benefits from workers being outdoors and in an environment where social distancing is relatively easy to maintain, which suggests that housebuilding could be one of the first UK industries to return to normality. Of course, this also depends on whether customer interest remains as strong as Persimmon claims it is.

Persimmon has been on the road to recovery since the big crash in early March, and these recent developments suggest that it could emerge from this year in decent shape.

How to trade housebuilder shares

Where do you stand on UK housebuilders? Will Perismmon’s reactivation be seen elsewhere? You can trade long or short with IG:

1. Create an account or log in to our world-class trading platform
2. Type ‘Persimmon’ in the search bar to find the shares
3. Choose your position size
4. Click ‘buy’ to go long, or ‘sell’ to go short
5. Confirm your trade

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