It’s mixed signals from the Housing sector today with Foxtons swinging to an H1 loss due to weak London sales (group revenues -9.5%) and scrapping its dividend. The latter is normally the last thing companies wants to do, removing an element of support for the shares. Then again the shares weren’t even yielding 1% recently, even after steep share price declines (-44%) since April highs. In which case it wasn’t exactly an income stock, even at the best of times.

So the dividend loss is perhaps a non-event. And it is only because the company didn’t turn a profit, meaning it could just as quickly be reinstated if and when things improve, especially if today’s announcement of a review of its cost base proves fruitful. The outlook message wasn’t exactly rosy either, being mixed with sales still subdued but renting showing momentum. However the shares are up 2%. Which is likely due to the update not including an explicit profits warning, suggesting that cost saving in H2 and better renting could still rescue the full year from poor sales.

At the other end of the spectrum, closer to the Housebuilders themselves, we have Ibstock shares down in the dumps (-12%) after a profits warning, just two months after a disappointing May AGM trading statement. Today’s update confirms the impact of an extended Winter on brick and tile-making, making for a slow start to the year. At the time it expected volumes to be H2 weighted, however, it now says production has been slow in recent months, especially July. Despite corrective measures, output, and thus cost recovery, is expected below expectations, made worse by increased maintenance being necessary over the next twelve months. This is costly (both directly and in terms of lost output) which will only go to hamper output further, although a brand new factory in Leicestershire may provide some relief.

Might the housebuilders face pricing pressure from H2 into next year? Ibstock was already forecasting price rises due to energy costs. Might they need to go even higher, squeezing housebuilder margins further? Or will it have to take the hit to ensure long-term agreements?

Not great news at a time when UK house price growth is slowing in the face of Brexit uncertainty, tighter ending conditions and of course a likely UK interest rate rise this week? The opposing share price relations would imply that, right now, you’re better off exposed to renting than building/selling. Watch those input costs.

Mike van Dulken, Head of Research, 30 July 2018