Housebuilder shares rise amid Labour’s plans for 1.5m houses

Housebuilder shares rose on Friday following Labour’s victory in the general election. 

Barratt shares rose 1.97 per cent or 9.7p to 501.70p on Thursday morning, while Taylor Wimpey’s shares jumped 1.85 per cent or 9.7p to 501.70p. 

Persimmon shares jumped 3.39 per cent or 48.50p to 1,480.50p, shares in Berkeley Group rose 1.31 per cent or 62.00p to 4,786.00p. Vistry shares are up 3.15 per cent or 39.72p to 1,298.72p. 

The Labour party put housing development and planning reform at the centre of its 142-page manifesto.

The party has vowed to build 1.5million homes within five years and oversee the biggest boost in affordable housing for a generation.  

Prior to the election win, Labour announced it would unveil a housebuilding plan within days of winning the election. 

Supposedly poor-quality areas of green belt could be reclassified as ‘grey belt’, with spaces like car parks, former tips and scrubland all viewed as viable development sites.

Labour has dubbed the housing crisis as one of Britain’s biggest barriers to growth. 

It wants to hire around 300 new planning officials and block local authorities from ‘stonewalling’ proposed developments in ‘grey-belt’ sites. 

A vast increase in the number of homes being built and loosening planning rules spells good news for housebuilders, who for many years have also benefited from government Help to Buy schemes. 

Speaking to This is Money, Jennie Daly, chief executive of Taylor Wimpey, said: ‘Housing delivery has a vital role to play in our society and in unlocking economic growth across the UK through investment, not just into much needed energy efficient new homes, but in the associated investment in community infrastructure such as schools and amenities, and local transport infrastructure. 

‘A decade-long problem of under-resourcing in the planning system and lack of ambition at all political levels has driven a rapid decline in both new housing development and planning consents across the country, and so we welcome the Labour Party’s long-standing focus on the reform of planning policy and look forward to working closely with them to enable the delivery of critical new housing.’

David Thomas, chief executive of Barratt told This is Money: ‘The country urgently needs more new homes, of all types and tenures. 

‘We look forward to working with the new government to help them build 1.5m homes across the next parliament, unlocking planning and helping first-time buyers access affordable finance, ultimately helping more families own a high quality, sustainable, new home.’

Richard Hunter, head of markets at Interactive Investor, said: ‘One sector which most agree will see some benefit from the new political regime is housebuilding, which has seen some recent strength on hopes of reforms, less red tape in terms of planning and more supply. 

‘In early trade, the likes of Persimmon, Vistry Group, Taylor Wimpey and Barratt Developments all rallied on improved prospects which are also being driven by the possibility of an interest rate cut later in the year.’

Amid higher interest rates and costlier mortgages, many housebuilders have had a turbulent few years. 

In March, Persimmon revealed its full-year revenue fell 27.5 per cent to £2.8billion, driven by lower volumes as completions were down by around a third, to 9,922 new homes. This was partially offset by 2.9 per cent higher average selling prices of £255,752. Underlying operating profit came in at £0.4billion, down from £1billion.

August looks set to be a crucial month for the property market, amid the Bank of England’s next vote on interest rates. 

Ben Perks, managing director at Orchard Financial Advisers told Newspage: ‘All eyes now turn to Rachel Reeves to steer this ship into steadier waters for borrowers. 

‘The next meeting of the Bank of England’s Monetary Policy Committee in August will arguably have a more immediate impact on the property and mortgage markets if the outcome is a cut to the base rate.’

Oli Creasey, an analyst at Quilter Cheviot, said: ‘For now, housebuilders must remain hostages to interest rate fortunes. 

‘While interest rates are flat, volumes and margins are in opposition to one another, and only lower mortgage rates (or perhaps much higher wages) can increase prices without having knock on effects elsewhere. 

‘Sector earnings are low, and likely to remain depressed for some time to come regardless of the new government.’