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House builders lead FTSE surge on stamp duty ‘holiday’

6 July 2020

Builders rally on reports chancellor Rishi Sunak will unveil a stamp duty ‘holiday’ to stimulate the housing market. Scottish Mortgage and Fidelity China Special Situations rally on leap in Chinese stock markets.

The FTSE 100 has rallied, led by house builders amid reports that the chancellor, Rishi Sunak, is to unveil plans for a stamp duty ‘holiday’ to stimulate a housing market suffering from the economic impact of the coronavirus pandemic.

The UK blue-chip index rose 116 points, or 1.9%, to 6,274, with shares in builders clustered at the top of the index. Persimmon (PSN) rose 6.1% to £23.96, Barratt Developments (BDEV) rallied 6.1% to 520.2p, Taylor Wimpey (TW) added 4.6% to 143.3p and Berkeley (BKG) traded 4% higher at £43.29.

According to reports, Wednesday will see Sunak unveil a temporary raising of the level at which house buyers start paying stamp duty from £125,000 to £500,000, expected to come into force in the autumn.

It was a similar story on the FTSE 250, which climbed 1.1%, with house builders leading the way. Vistry (VTY) rose 6.9% to 728p, Crest Nicholson (CRST) was up 6.9% at 211.6p, Redrow (RDW) added 6.6% to 455.2p and Countryside Properties (CSP) traded 4.8% higher at 343p.

Tom Bill, head of UK residential research at property consultancy Knight Frank, said the move would ‘provide welcome financial relief for millions of people, including first-time buyers’.

‘However, it would need to be introduced immediately to prevent buyers from putting plans on hold and losing the momentum that has built since the market reopened.’

Glynis Johnson, analyst at Jefferies, agreed. ‘Announcing such a move ahead of time risks that consumers delay home purchases to take advantage of the tax holiday,’ she said.

‘The last time changes in stamp duty were announced for a future date, it led to a signifiant impact on buying decision ahead of the change being implemented. The 3% additional stamp duty for second-home buyers announced in December 2015, and implemented in April 2016, led to a significant spike ahead of the change, followed by a significant fall in housing transactions in order to take advantage of the change.’

On the Alternative Investment Market, shares in Boohoo (BOO) slumped 10.9% to 345.5p after an investigation from the Sunday Times found workers in a Leicester factory making clothes for the online business were being paid as little as £3.50 an hour.

UK stocks followed Asian markets higher as Chinese blue chips hit a five-year high despite the World Health Organization reporting a new global daily record of 212,000 Covid-19 infections.

The leaps in the Chinese market suggest that ‘investors are tactically opting for a stronger and speedier recovery in Asia over the US’, said Fiona Cincotta, analyst at City Index. 

‘Even as the coronavirus statistics show concerning high increases, the mood in the market remains bullish as investors place firm belief in the view that a revival in Chinese activity will help sustain global economic growth,’ Cincotta said.

Scottish Mortgage Trust (SMT), the global trust heavily invested in high-tech disrupters in Chin and the West Coast of America, extended its 48% gain this year with a further 5% or 44p rally to 898p takes its market value beyond £12.6bn.

Fidelity China Special Situations (FCSS) jumped 18.5p or 6.4% to 306p after Chinese shares advanced 3%. 

Heavily discounted real estate investment trusts struggled to find buyers with Newriver Reit (NRR) and AEW UK Reit (AEWU) off 2.6p at 64.4p and 2.8p at 69.6p.

Warehouse Reit (WHR) eased 0.5p or 0.4% to 110p after raising £157m in a share placing, smashing its £100m target.

Target Healthcare (THRL) bucked the trend, up 1.6p or 1.5% at 109.4p after reporting a fall in Covid-19 infections at its care homes, 96% rent collection and confirmed next month’s quarterly dividend would be paid in full.

Investment company news brought to you by Citywire Financial Publishers Limited.

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