FTSE 100 housebuilders have been hit harder than most UK stocks by the Iran crisis. The Barratt Redrow (LSE: BTRW) share price has crashed 26% in the last month, the worst return on the entire blue-chip index. Persimmon (LSE: PSN) is fourth worst performer, down 22% over the same period. Berkeley Group Holdings also sits in the bottom 10, falling almost 17%. What’s going on?
FTSE 100 sector shock
Housebuilders seem to be the market’s whipping boys whenever trouble strikes. After Brexit in 2016, the sector plunged 40% as investors feared the ensuing volatility would push up unemployment and hammer house prices.
The Covid pandemic delivered another shock, although demand was supported by temporary stamp duty holidays. Then came the cost-of-living crisis. Mortgage rates soared, affordability collapsed, and the price of labour and materials jumped sharply. Margins were squeezed on all sides, while sales, price growth and completions slowed.
The industry has also faced problems of its own. Developers have committed £2bn to fix unsafe cladding after the Grenfell tragedy, with more to come. The end of the government’s Help to Buy scheme removed a key source of demand.
Shares in Barratt Redrow and Persimmon have slumped 60% over the last five years. The former’s market-cap has dropped to £4bn, while the latter’s sits near £3.85bn. If this continues, both could slip into the FTSE 250. They’d join fellow housebuilder Taylor Wimpey, which has already suffered this fate.
Global tensions threaten
The mood seemed likely to brighten at the start of the year. The Bank of England was expected to cut interest rates several times, which would have reduced mortgage rates and revived demand, sales and prices. Now war in the Middle East has created fresh uncertainty. Higher energy prices could revive inflation and keep interest rates elevated for longer.
That killed off a promising recovery in the Persimmon share price. That bounce followed encouraging results and offered some relief after years of disappointment.
On 13 January, the company reported that 2025 completions rose 12% to 11,905, comfortably beating forecasts of 11,300. Average selling prices increased 4%. The board revealed a solid order book and an encouraging start to 2026. It also said annual earnings should land at the upper end of forecasts, despite challenging market conditions.
On 11 February, Barratt Redrow also reiterated full-year guidance despite subdued market conditions, and highlighted a “resilient” first half.
Valuations demand attention
However, both builders look good value today. Persimmon trades on a price-to-earnings ratio of 11.8. Barratt Redrow sits close behind on 11.3. They offer generous income too. Persimmon has a trailing yield of 5% while Barratt Redrow yields 6.1%. Dividends are never guaranteed of course, and may take a hit if struggles continue.
Incredibly, both share prices are now lower than they were a full decade ago. I think they’re worth considering with a long-term view. But with global tensions high and interest rate cuts off the table for now, the sector could face another run of volatility before it finally comes good.
