Shareholders fear housebuilders' optimism has shaky foundations

Bosses talk of higher margins, and more houses being built, but shares in housebuilding firms remain gloomily low

 

 

Something doesn't feel right in the housebuilding sector. Shares are languishing despite a slew of upbeat statements from industry chiefs.

If the worst of the housing downturn is over, stock prices should be heading north as confidence returns – albeit slowly. In fact, market valuations have declined by 30% over the past three months. The City doesn't believe the recovery story being peddled by the housebuilding bosses.

Investors living in fear of a double-dip recession are alarmed at the continued unwillingness of the banks to dish out mortgages. The buy-to-let market has collapsed, and an acute shortage of rental properties is looming. And commentators say that by the end of 2011 house pricescould fall by 10% from the mini-recovery seen mid-way through last year

 

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