Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Housebuilding companies led a UK stock rally on Friday as Labour won by a landslide in the general election on a platform that includes a big boost to housebuilding and urgent pro-development planning reforms.
Persimmon was up 4.2 per cent in early morning trading, Vistry climbed 3.7 per cent, Barratt Developments rose 2.9 per cent and Taylor Wimpey gained 2.4 per cent. The FTSE 250 index of domestically focused mid-cap stocks was up 1.1 per cent.
“We see this political change as a major positive for UK housebuilders,” said Glynis Johnson, analyst at Jefferies. “A government led by Labour appears more supportive, engaged and focused on delivery of homes.”
Labour has won support from housebuilders in the run-up to the July 4 vote, with promises to deliver 1.5mn new homes over five years in government and a sweep of pro-development policy changes.
Sir Keir Starmer’s party has promised to immediately reinstate hard housing targets for local governments, which were made “advisory” under the Conservatives.
Labour has also pledged a review of greenbelt boundaries, which hamper development around major cities, and to quickly identify sites for several large-scale “new towns”.
Stewart Baseley, executive chair of the Home Builders Federation trade group, told the Financial Times during the election campaign that the Tories had surrendered their traditional place as the “party of home ownership” through anti-development policies, and that the industry broadly backed many of Labour’s ideas.
However, Labour faces a daunting task to reach its housebuilding targets, which equate to 300,000 new homes per year on average. No administration has delivered that number of homes annually since the mid-1970s, when the government stopped large-scale public-sector housebuilding.
“With one in five children living in overcrowding, and 4.2mn people in need of a social home, the scale of the challenge facing the new government cannot be underestimated,” said Kate Henderson, chief executive of the National Housing Federation, which represents affordable housing providers.
The number of new homes built this year is forecast to decline sharply to as little as half the new government’s target, as high interest rates hold back buyers.
Housebuilders are likely to push Labour to offer more support to purchasers, particularly first-time buyers, beyond its pledge to make permanent an existing mortgage guarantee scheme.
Chronic underdelivery of new homes has contributed to house prices rising further out of reach relative to incomes and to a shortage of rental homes.
David Thomas, chief executive of Barratt, the UK’s largest housebuilder, said: “The country urgently needs more new homes, of all types and tenures.”