Housebuilder shares rise amid Labour’s plans to build 1.5m homes and expand ‘grey belt’

Shares in housebuilders rose on Friday following the Labour Party’s victory in the general election.

Barratt shares rose 1.97 percent or 9.7 pence to 501.70 pence on Thursday morning, while Taylor Wimpey shares rose 1.85 percent or 9.7 pence to 501.70 pence.

Persimmon shares rose 3.39 percent or 48.50 pence to 1,480.50 pence, Berkeley Group shares rose 1.31 percent or 62.00 pence to 4,786.00 pence. Vistry shares up 3.15 percent or 39.72 pence to 1,298.72 pence.

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

The party has pledged to build 1.5 million homes over five years and oversee the biggest push for affordable housing in a generation.

Before winning the election, the Labour Party announced that it would unveil a house-building plan within days of winning the election.

Supposedly poor quality green belt areas could be reclassified as “grey belt”, and spaces such as car parks, former landfills and bushland could be considered viable development sites.

The Labour Party has called the housing crisis one of the biggest barriers to growth in Britain.

He wants to hire around 300 new planning officers and prevent local authorities from obstructing proposed developments on “grey belt” sites.

A big increase in the number of homes being built and the easing of planning rules is good news for housebuilders, who have also benefited from the government’s Help to Buy schemes for many years.

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 only in much-needed new energy-efficient homes, but also in associated investment in community infrastructure, such as schools and services, and local transport infrastructure.

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

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 1.5 million homes over the next parliamentary term, unlocking planning and helping first-time buyers access affordable finance, ultimately helping more families own a high-quality, sustainable new home.”

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

‘In early trading, companies such as Persimmon, Vistry Group, Taylor Wimpey and Barratt Developments rose on the back of an improving outlook, which is also boosted by the possibility of an interest rate cut later in the year.’

Amid higher interest rates and more expensive mortgages, many homebuilders have had a turbulent few years.

In March, Persimmon revealed that its annual revenue fell 27.5 per cent to £2.8bn, due to lower volumes as completions fell by around a third to 9,922 new homes. This was partly offset by a 2.9 per cent rise in average selling prices to £255,752. Underlying operating profit stood at £0.4bn, down from £1bn previously.

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

Ben Perks, managing director of Orchard Financial Advisers, told Newspage: ‘All eyes are now on Rachel Reeves to steer this ship into calmer waters for borrowers.

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

Oli Creasey, analyst at Quilter Cheviot, said: ‘For now, housebuilders must remain hostage to the fate of interest rates.

‘While interest rates remain stable, volumes and margins are opposites of each other, and only lower mortgage rates (or perhaps much higher wages) can increase prices without having knock-on effects elsewhere.

‘Profits in the sector are low and are likely to remain depressed for some time, regardless of the new government.’