Homebuilders suffer half of value due to tax cuts

The UK homebuilders have lost half of their value this year because of tax cuts announced by Liz Truss's government that plunged the sector further into crisis.

A FTSE index tracking companies like Persimmon Plc and Taylor Wimpey Plc have fallen by 14% since Chancellor Kwasi Kwarteng delivered his mini budget a week ago. The unfunded fiscal bonanza caused a surge in interest rates in the UK and caused a surge in mortgage market predictions.

The slump has cut the industry's stock market value by 22 billion $24.5 billion A year-to-date decline of over 50% for the index, surpassing the 2008 plunge triggered by the US mortgage crisis that sent global financial markets tumbling.

According to Goodbody Stockbrokers, Shane Carberry, an analyst at Goodbody Stockbrokers who has bought ratings on companies like Persimmon, Taylor Wimpey and Barratt Developments Plc, some homebuilders are trading at 30% discounts on the amount they originally paid for the land they own. He said that house prices would drop about 10%.

Carberry asked if house prices will fall by that much in reality, and added that homebuilders balance sheets are much stronger than they were during the financial crisis.

He said that they were better equipped to deal with any crash that comes their way, and I don't think that's being factored into valuations to the extent that it should be, because they're much better equipped to deal with any crash that comes their way.