Construction giant Barratt Developments (LSE: BDEV) pricked the wave of euphoria waving over the housing sector on Wednesday with its latest trading update.
Shares in the business were last dealing 4% lower in midweek business after Barratt advised that conditions in London remain "more challenging" than the broader market, the result of higher transaction prices than the rest of the country.
Barratt has consequently "taken pricing action on a number of our sites in London," it advised, and the company plans to undertake further de-risking measures in the capital. This includes "an exchanged build and sale agreement on a bespoke development of 39 apartments for a total value of £47m."
A fly in the ointment
Barratt's statement that London is a difficult market should come as little surprise. After all, estate agency Foxtons has been reporting increasingly-challenging conditions in the capital for some time now.
While troubles in its high-end market cannot be overlooked, the outlook for Barratt -- like the rest of the housing market -- remains in pretty rude health, in my opinion, thanks to its broad nationwide presence.
Despite the softer London marketplace, Barratt advised that "overall market conditions remain healthy," with the builder reporting a sales rate of 0.74 net private reservations per outlet each week during July 1st to November 13th. This is up from 0.71 units in the corresponding 2015 period.
And total forward sales (including joint ventures) clocked in at £2.65bn, up 4.3% from the same period last year.
So while Barratt cautioned that "we are mindful of the potential for economic uncertainty created by the outcome of the EU Referendum," the company believes that "market conditions remain healthy."
The housebuilder also noted that "consumer demand is robust, driven by an undersupply of homes, good mortgage availability and a supportive government policy environment including Help to Buy."
Of course Barratt is not without its share of risk, as its midweek update proves. But I believe these troubles are more than baked-in at current share prices.
For the year to June 2017 Barratt deals on a P/E rating of 9.1 times, far below the FTSE 100 average of 15 times. And a 7.4% dividend yield trounces the blue chip average of 3.5%.
But those concerned about the health of the UK housing market may want to take a look at Wolseley (LSE: WOS) instead.
The heating and plumbing specialist is a major player in the robust US construction market, and its core Ferguson unit in North America generates four-fifths of total earnings. Meanwhile, Wolseley is embarking on huge restructuring in the UK, a strategy which includes the closure of 80 stores, to mitigate current trading turbulence here.
Wolseley may not be as appealing on paper as Barratt -- the company deals on a forward P/E ratio of 15.8 times and sports a far-more-modest 2.5% dividend yield. However, those fearful of collapsing British property prices may consider the engineer to be a superior stock pick.
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Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.