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How to play markets p.4
House builders to continue to rise as rates stay put & demand stays high?
House builders looked toppy towards the end of 2015, with sector volatility and a pause in their previously relentless uptrends. Here is a case whereby all this Chinese market chaos was beneficial, because borrowing remained relatively cheap throughout 2015 as a result. If people believe the price of property will rise, as almost everyone does (it’s a no brainer, yeah?) then it follows that property related companies – right the way through to plant hire and kitchen fitters – will do so too. And they did, for the most part.
What’s changed?
With the UK’s UK 100 being so heavily weighted by banks and USD/commodity-sensitive stocks, a falling benchmark index (the actually went up 8% in 2015, but no one’s bothered about that it seems) has certainly put the brakes on the Bank of England’s plans to raise rates soon. Housing demand appears to be high and house prices are still rising. The house builders were topping out in Q4 2015 because everyone thought borrowing costs would rise, leading to a fall in demand.
Taylor Wimpey (TW) Housebuilders
Taylor Wimpey shares have tested resistance 5 times in 6 months. They’ve tested rising support 5 times in 13 months. Which is more likely to be broken?
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Prepared by Michael van Dulken, Head of Research
