The UK PIN Fund (our fictional Fund consisting of property-related companies that are listed on the stock exchange) had another bad quarter in Q3, falling in value by 10.4%, despite six of the 10 companies paying dividends.
If you are getting a feeling of déjà vu reading this, it is because the intro above is almost identical to the intro to the review of the Fund in Q2. But Q3 was only better by a whisker, down 10.4% (to the end of Friday 23 September due to printing the magazine earlier this month) compared to a 10.5% fall in Q2.
The housebuilders took another hammering, down 11.9% in the third quarter, and by the time you read this it could be even worse as the ‘mini-budget’ announced by Kwasi Kwarteng on 23 September, promising massive tax cuts and hefty government borrowing in order to boost the flagging, deflationary UK economy…oh no wait, I mean to throw petrol onto the highest bout of inflation in the 21st Century, was erm, unsurprisingly not well received by the stock market, bond traders, the FX market and, now that the pound is in freefall, the Bank of England and the entire real estate sector.
No great surprise then that the housebuilder shares did not bounce back in Q3 as initially hoped. However, they are starting to look great value after such a terrible year of share price falls.
The five housebuilders in our Fund offered an average dividend of 8.5% on 23 September, and if their share prices fall further that average will soon hit double-digits, which is a great hedge against inflation.