The FTSE 100 surged by 8% in the first quarter of this year and, including dividends so did our fund. But before I gloat about another great quarter of returns for our fictional PIN Fund, consisting of 10 property-related shares listed within the FTSE 250, it is worth noticing that the six housebuilders included in the Fund fell by -2.3% on average in Q2. While that itself is not too bad, this was following on from a huge drop of -11.3% on average in the first quarter. So why no rebound in Q2?

Well, house price rises in the UK appear to be slowing, while they are falling in London and most likely the wider southeast region. Crest Nicholson shares fell by -14.2% in the second quarter (although the blow was softened slightly by a decent 4.8% dividend). This followed on from a hefty -17% slump in Q1 and the company is now very close to triggering our -30% stop loss, which will be activated if shares fall much further in Q3. Fortunately, even if this happens, despite being in our Fund for just nine months the company has already paid 9.9% of the purchase price in dividends so the total loss would be around 20% and not 30%.

In June Crest Nicholson warned that profit had dipped in the six months to the end of April due to “generally flat pricing” for its properties. It had also seen its costs increase. The company announced that it is retreating from the London market.

Chief executive Patrick Bergin said: “Even in the outer zones of London the pricing momentum is not with us, and absolute affordability is now quite stretched.”    

Jefferies UK Building & Residential Services said of the firm: “Around 20-25% of current revenues are derived from homes with prices above the Help to Buy threshold of £600,000 and these are having to be discounted to get sales over the line. This is the first hit to margin. The second hit to margin is that, like others across the sector, Crest is seeing build cost inflation in the region of 3%-4%, but unlike others, Crest is not seeing positive house price inflation.”