Optimism on construction boom lifts housebuilder stocks

Shares in the UK’s major housebuilders have all risen in the past five days as news of government investment buoys the chances of a construction market boom.

Vistry and Crest, which have recently boosted their focus on affordable homes, were particular winners: Vistry has risen by more than 20 per cent since June 6, while Crest hae risen 11.3 per cent.

Barratt, Permission and Bellway all rose by just under 10 per cent, while Taylor Wimpey and Berkeley rose by around five per cent.

Housbeuilders have been weighed down by the pandemic, higher interest rates, rising input costs, the end of Help-to-Buy in 2023 and regulatory levies.

But now, “investors who “feel that an upturn in demand is coming, and that planning deregulation will ease cost burdens, may feel that this represents an opportunity,” AJ Bell investment director Russ Mould said.

Improved buyer confidence and easing interest rates have also created optimism in the sector, with affordability slowing starting to improve.

The optimism can be felt across the supply chain: Brickbuilder Ibstock has said it plans to boost its production capacity to “benefit from the recovery as it gathers pace”.

Government investment encourages investors

The government is set to announce the creation of a new ‘housing bank’ to offer cheap finance to housebuilders this afternoon in its spending review, which should help private developers build low-margin affordable homes.

Funds for the Affordable Housing Programme, which provides grants to local authorities and not-for-profit housing associations, as well as higher rent settlements, will also double over the next five years.

“The sector is poised and ready to deliver [on government targets],” Pocket Living CEO Andrew Johnson said.

After Bellway reported a surge in annual completions earlier this week, Julie Palmer, Partner at Begbies Traynor, said that there are “encouraging signs” in the sector, but that “challenges remain”.

“Recent forecasts point to the UK falling short of the Government’s 1.5 million target for new homes which underlines the scale of the challenge.

“That said, housebuilding is a clear priority for the government, so established developers like Bellway are well-placed to benefit if policy momentum builds.”