On Monday, the Social Market Foundation claimed the financial and construction sectors will end up the worst hit by the Covid-19 pandemic. That’s not good news for Taylor Wimpey (LSE: TW) or Barratt Developments (LSE: BDEV), you might think. But as I write, the Taylor Wimpey share price is up 4.5% on the day, and the Barratt share price has gained 7.4%.
It’s all down to a trading update from Barratt Developments, ahead of full-year results. And it seems to be defying the current property market gloom. Much of the country is enjoying a return to work, and Barratt is up there. The company said: “All operational sites were reopened by 30 June 2020 and all employees, other than those shielding, have now recommenced working in the business“.
Barratt share price recovery
Since the bottom of the stock market crash, the Barratt share price has been recovering impressively. We’re now looking at a gain of 50% since Barratt’s low in March. And that, again, shows that it can be a great time to buy when everyone is panicking. In Warren Buffett’s words, be greedy when others are fearful.
The three-month lockdown has obviously had an impact on the number of completions. Barratt reported a total of 12,604 homes built during the year (including joint ventures). That’s a big drop down from 17,856 in 2019, but I wouldn’t call it a disaster. A fair bit of that shortfall will simply represent delays, which I’d expect to start catching up. And hopefully the Barratt share price will follow.
In fact, the company reported “high customer interest levels since sales centres reopened,” and a forward order book at 30 June 2020 of 14,326 homes. A year ago, Barratt’s order book stood at 11,419 homes, so we’re seeing some pent up demand here. Barratt’s financial situation seems sound too, as the firm said it “will now repay all furlough funds received“.
Taylor Wimpey gaining too
The uptick in Taylor Wimpey shares seems to be on the back of Monday’s Barratt share price gain. So I’m optimistic there too. Taylor Wimpey’s latest update in June was perhaps a little early, but things were already returning to normality by then. All employees had returned from furlough, and most show homes and sales centres were reopened. Similar to Barratt, Taylor Wimpey reported “a very high level of demand for appointments”.
Close on the Barratt share price, the Taylor Wimpey share price has gained 41% since its low point. That’s not quite as impressive a rebound, but anyone buying during the panic would surely be happy to take it.
Half-year results are due on 29 July, and I really think we’ll see a positive affect on the Taylor Wimpey share price. It’s hard to put a rational valuation on the shares right now, as forecasts are up in the air. We can’t put a figure on the likely long-term dividend yield either. But I expect both the share price and the dividend to resume their long-term trends before too much longer.
The same applies to the Barratt share price and dividend too. I see a solid long-term future as long as the UK’s housing shortage continues. The way it’s going, that’s looking like it could be forever.