After a terrible second quarter, then a rebound in the third quarter, the best was saved until last in 2023 when our UK PIN Fund (a fictional Fund of property related shares) returned a huge 21.1% in the fourth quarter of the year.

All 10 companies produced a positive return in Q4, with Rightmove by far the worst performing share, returning ‘only’ 3.3% during the three-month period. However, this was still more than twice as much as the FTSE 100, which only grew by 1.6% in Q4.

A solid performance in a difficult environment
Excluding Segro (+23.6% in Q4), which was only entered into the Fund at the end of Q3, (replacing Whitbread), eight of the other nine companies made a positive return overall last year, with the Fund returning 17.9% in 2023. The best performing shares (including dividends) last year were Taylor Wimpey (33.2%), followed by Barratt Developments (31.6%) and Bellway (29%).

Considering that the UK base rate started 2023 at 3.50% and ended the year at 5.25%, these high returns for three of the biggest housebuilders in the country last year where somewhat surprising, especially considering that the Help to Buy scheme ended in March 2023. So why have the shares performed so well?

The fast answer is that property prices have not fallen enough to impact housebuilder profits…yet. For example, Berkeley Group last reported on 8 December, announcing its interim results for the six months ending 31 October 2023. Despite sales reservations falling by around a third compared to the same period in 2022, profit before tax was up 4.6% to £298m.