Are housing shares a stable guess – or will they crumble?

One cherished government aspiration remains, despite the abandoning of growth and other targets in the Spring Statement.

This is the pledge to deliver 300,000-plus new homes every year, building a total of 1.5m by 2029, at a pace not seen since the 1970s.

Doubt has surrounded the Government’s grand design from the outset – to the dismay of investors eager to benefit from a construction boom. But, while questions will continue to be asked about the viability of the policy, the independent Office for Budget Responsibility (OBR) this week said that 1.3m homes could be erected during this Parliament.

The OBR also contends that allowing more people to realise the dream of home-ownership, as part of a wider expansion of all development, would provide a £6.8billion boost to the economy.

This statement of confidence coincided with results from the troubled affordable housing specialist Vistry which reported weak trading and a sharp decline in profits.

But most housebuilders are looking on the bright side – a stance that investors should note.

Alan Dobbie, manager of the Rathbone Income fund, which has holdings in Persimmon and Taylor Wimpey, says: ‘In the conversations we have had recently with housebuilder management teams – a group not always known for being glass half-full – they sounded relatively encouraged about the measures announced thus far.’

These measures include planning reforms intended to streamline processes and free up land for development.

In her Spring Statement, Chancellor Rachel Reeves committed £600m to training programmes, pledging ‘up to 60,000 more engineers, brickies, sparkies and chippies’.

She also provided a £2billion grant to fund 18,000 affordable homes.

Meanwhile, hopes that a housebuilding revival may already be underway were reignited by another set of results, this time from Bellway. The housebuilder reported a 20 per cent rise in profits and a 12.5 per cent increase in sales.

Chief executive Jason Honeyman reported a pick-up in reservations of homes since the start of this year. The interest has not slackened, although the stamp duty concessions end on Monday. After that date, the tax on a £295,000 property goes up from £2,250 to £4,750.

Bellway shares are still 25 per cent lower than six months ago, while Berkeley is 26 per cent lower. Vistry shares have slumped 55 per cent.

Does this suggest that the housebuilding sector is a bargain basement opportunity?

Possibly, but only the adventurous should join the hunt.

As Oli Creasey, property analyst at wealth manager Quilter Cheviot, points out: ‘While Bellway and the housebuilding industry are on the road to recovery, there is still a long way to go.’

Creasey highlights recent figures showing that mortgage payments as a percentage of take-home pay are more than a third higher than in 2019. This means that many are barred from the housing ladder, something the Government could remedy by replacing the Help to Buy scheme, which was withdrawn in 2024.

Affordability is not the only issue. At least 200,000 new workers are needed to solve the labour shortage, and Donald Trump’s tariffs will make building materials even more expensive.

Real estate consultancy Knight Frank says that only half of the hoped-for homes may be built this year, since housing associations are struggling to invest in new social housing stock. But these bodies must still pay for the remediation of cladding on blocks of flats after the Grenfell tragedy.

If you prefer to back a sector that’s rebuilding its fortunes, here are the shares that the professionals think are worth buying or holding.

Barratt Redrow

Shares in Barratt Redrow are 20 per cent lower than a decade ago at 430p, thanks to the pessimism that has enveloped the sector. But analysts rate Barratt Redrow a ‘buy’ with a target price of 560p.

The merger between Barratt Homes and the more upmarket Redrow last September should produce £100m of savings.

In the medium term, Barratt Redrow – a member of the FTSE 100 – thinks it can build 22,000 homes a year.

Since it has about 100,000 plots at its disposal, this should not be too much of a stretch.

Bellway

Bellway, an FTSE 250 constituent, aims to build 8,500 homes this year, catering for most categories of buyer. It has ample space on which to do so, with about 98,000 sites in its land bank.

Last summer Bellway withdrew from a deal to merge with Crest Nicholson, citing concerns over the size of the latter’s cladding remediation bills.

This underlines the shadow that Grenfell continues to cast over the industry, although ministers have delayed implementation of the £3.4billion Building Levy intended to finance cladding removal. It was feared that the tax could derail the new-homes target. Analysts are sanguine about Bellway’s prospects, rating the shares a ‘buy’, with an average target price of 3132p, against the current 2404p.

Berkeley

Berkeley focuses on London and the South East, which means it has been affected more than some by the withdrawal of Help to Buy. But the £3.61billion business is moving into build-to-rent (BTR), which provides rental blocks for those frozen out of home ownership.

Boss Rob Perrins says that there been a rise in sales reservations, but this will continue only if interest rates fall further and the economy becomes more stable. Most analysts rate the shares – at 3620p – a ‘hold’.

Crest Nicholson

Last month Crest Nicholson warned that it could breach its banking covenants if conditions worsened. But earlier this month chief executive Martyn Clark said there were ‘early signs of progress’ but the market remained ‘susceptible to weak consumer confidence’. The £450m company is targeting 2,300 homes a year.

Analysts evidently believe that Crest Nicholson may have turned a corner. The shares have risen by 11 per cent over the past month to 173p.

Five out of ten brokers that follow the company consider the shares to be a ‘buy’ with an average target price of 230p. Another five regard the shares as a ‘hold’.

Persimmon

Persimmon, a £3.83billion FTSE 100 company, will be building 11,500 homes this year.

Boss Dean Finch seems positive about the outlook, but he wants an aid package for ‘Generation Rent’. Earlier this month, he said: ‘This is the first time in 60 years that there hasn’t been any help for first-time buyers.’

With or without such a scheme, analysts seem to believe that Persimmon can exploit the upturn in housebuilding. Most rate the shares, at 1202p, a buy with an average target price of 1541p.

Taylor Wimpey

Taylor Wimpey, Britain’s second largest housebuilder, expects to sell 10,400 to 10,800 homes this year. Boss Jennie Daly said last month that there had been a ‘robust’ start to the spring selling season. If demand surges, Taylor Wimpey, a £4bn FTSE 250 company can cope – there are about 79,000 plots in its land bank.

The shares are 35 per cent down over the past six months at 110p. But analysts seem to sense that the worst may be over. They rate the shares a ‘buy’ with an average target price of 147p.

Vistry

Shares in Vistry, have slumped by 55 per cent to 585p over the past six months, in the wake of three profit warnings arising from cost overruns at its southern division.

Chief executive Greg Fitzgerald, who said the crisis had been ‘a good kick up the a*** for me’, has taken action on various fronts –including ordering staff back into the office five days a week.

Vistry, which operates under the Bovis, Countryside and Linden brands, thinks that it will pick up a decent chunk of the Government’s £2billion affordable housing grant. But its woes mean that its shares are a ‘hold’… for the time being.