The share prices of major UK housebuilders surged following Labour’s significant victory in the general election.
- Builders like Vistry, Persimmon, Taylor Wimpey, Barratt, and Berkeley saw their shares increase by 2-3%.
- Labour focused its campaign on addressing the housing supply crisis, pledging 1.5 million new homes.
- The party also committed to planning system reforms to speed up development processes.
- Ongoing challenges in the mortgage market and high interest rates add complexity to the housing landscape.
Shares of leading UK housebuilders such as Vistry, Persimmon, Taylor Wimpey, Barratt, and Berkeley experienced an increase of 2-3% after Labour’s resounding victory. This reaction in the stock market comes as Labour promised to address the housing shortage with an ambitious plan to build 1.5 million homes over the next parliamentary term.
Labour’s commitment extends beyond just building homes; it includes significant planning system reforms to stimulate economic growth. The new Chancellor Rachel Reeves emphasised in a BBC interview that planning reform is crucial, saying, “To build the 1.5 million homes and the energy infrastructure we’ve committed to, we need to change how our planning system works – speed it up, stop the bureaucracies that are tying up investments in red tape.” The plan includes development in lower-quality green belt areas, known as the ‘grey belt.’
Experts have mixed feelings about the feasibility of Labour’s promises. Analysts at RBC Capital Markets are cautiously optimistic, suggesting that even Labour’s rhetoric might temporarily boost share prices. However, Sarah Coles, head of personal finance at Hargreaves Lansdown, warned that overhauling the planning system could be a “gradual and tortuous process.”
The rise in housebuilder shares is set against a backdrop of challenges in the mortgage market. Halifax, the UK’s largest mortgage lender, indicated that high mortgage costs remain the most significant hurdle for homebuyers. Amanda Bryden, head of mortgages at Halifax, mentioned that although high interest rates are a current pressure, they are expected to ease as incomes rise and house price growth stays subdued. According to Halifax’s figures, the average UK house price in June was £288,455, a slight decrease from May.
The Bank of England’s recent increase of the key interest rate to 5.25%—the highest in 16 years—is part of efforts to combat soaring inflation. They have hinted at a possible rate cut in their next meeting. This situation adds pressure to homeowners with expiring fixed-rate deals, with the current average rate for a two-year fixed deal at 5.93%. Despite the national challenges, regional disparities exist: Northern Ireland saw the fastest house price growth at 4%, while London remains the UK’s most expensive region, with average prices at £536,306.
Political analyst Sir John Curtice indicated that the Conservatives’ poor performance in the election, especially in areas with significant numbers of mortgage holders, can be linked to market turmoil following the September 2022 mini-budget.
The landscape for housebuilders is set to evolve significantly, driven by Labour’s ambitious housing and planning reforms amidst a challenging mortgage market.
