Given that Persimmon (LSE:PSN) only builds homes in the UK, it might seem a little odd that its shares have been one of the FTSE 100’s biggest casualties from events in the Middle East.
So is this an opportunity to buy a beaten-down stock that could bounce back soon? Or is a permanent decline more likely? Let’s discuss.
Tough times
A look at last week’s daily share price movements makes for gloomy reading for Persimmon’s shareholders.
| Date | Share price change (%) |
|---|---|
| 2.2.26 | -2.99 |
| 3.3.26 | -5.95 |
| 4.3.26 | -1.46 |
| 5.3.26 | -2.51 |
| 6.3.26 | -1.93 |
| Overall | -14.04 |
It appears as though investors are worrying about the prospect of higher inflation and rising interest rates. Indeed, the 10-year gilt rate, often used as a benchmark to price mortgages, rose from around 4.3% to 4.65% over the course of the week. Higher borrowing costs would be bad for the housing market.
In addition, with the price of oil soaring more than 20%, there are concerns that inflation could start to pick up once more. Not only could this increase the cost of building materials but it would also further squeeze consumer incomes and make mortgages increasingly unaffordable. When these factors are considered, the week’s 14% drop in the value of Persimmon’s shares is more understandable.
Nonetheless, it’s still disappointing. Especially given that the housebuilder’s share price has been steadily rising in recent months. On 8 September 2025, it was 1,100p. Before last week’s events, it had climbed to 1,506p. Optimism surrounding further interest rate cuts and rising sales enquiries appear to be the drivers.
Before the market opened today (9 March), the group’s shares were priced at 1,295p.
What next?
One benefit of this is that new investors can enjoy a higher yield. Based on the amount paid over the past 12 months (60p), the stock’s offering a return of 4.6%. This is comfortably above the FTSE 100’s yield of 3.1%. Of course, the group’s payout is likely to come under threat if the double whammy of higher inflation and increased borrowing costs becomes a reality.
Everyone, not least those in the Middle East, will be hoping that the current conflict comes to an end soon. Assuming it does, energy prices and inflation fears should start to ease. Until then, the Persimmon share price could slide further.
The Bank of England’s monetary policy committee is due to meet on 19 March. Before last week, there were hopes that the base rate would be cut. But this now looks to be in doubt. However, from a long-term perspective, I think the fundamentals of the housing market — and Persimmon — remain strong.
There’s a chronic under-supply of new properties in the country and the government’s planning reforms should make it easier to build. Positively, the group has a healthy balance sheet with no debt. In addition, it owns over 80,000 plots of land, many with planning permission. And as we’ve seen, the stock offers a pretty good yield.
But I don’t think it’s worth considering the housebuilder’s shares until it’s clear that the current conflict is coming to an end. Ongoing uncertainty is likely to further dent the group’s market cap. Only then will we know for sure whether it’s a bargain. That’s because we’ll be in a better position to understand how the conflict has impacted construction costs and disposable incomes. Hopefully, we won’t have to wait too long to find out.
