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The PIN Fund Falls in Q1 2018 – But Still Outperforms The FTSE 100

Peter Hemple reviews the performance of our fictional Fund of 10 property related shares

After returning 12.7% in the last quarter of 2017, it was always unlikely that the first three months of this year would see another strong return. As it was, the value of our Fund fell by 8.1%, but with overall dividend payments of 1% the total loss for the first quarter was 7.1%. While this compares favourably with the 7.8% fall in the FTSE 100 during the same period, as you can see in the table below, some of the share price falls (like Barratt and Crest Nicholson) were quite dramatic. So, let’s take a closer look at some of the companies in our Fund starting with the biggest faller – Barratt Homes.

Barratt pulls back from central London amid falling values
The UK’s biggest housebuilder announced in February that it will not seek to build any new homes in central London after being forced to cut prices on existing stock. David Thomas, Barratt’s chief executive, said the builder had not bought any new London development sites since 2014 and confirmed it had no plans to buy any more for the foreseeable future once those were built out. “We’ve been in a position over the past 18 months where that market has become very challenging to sell,” said Thomas, adding that Barratt had been lowering prices on homes to accelerate sales. The group, however, said it would continue to develop in the outer suburbs of the capital.

Average house prices in London began to fall late last year for the first time since 2009, according to Nationwide. However, Barratt says that its exposure to London is relatively low and the firm posted record first-half profits, with demand for newly built homes continuing to be fuelled by cheap mortgage rates and the government’s Help-to-Buy equity loan scheme.

At the end of February Barratt reported that total forward sales were up 2% on the previous year to £2.4bn. The group bought £641m worth of land over the six months, double the £328m it spent a year earlier. Barratt also said that average selling prices across its developments were up 6.5% over the past year to £281,000.

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