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Britain’s listed housebuilders are building fewer new homes than in a decade as planning rules and high mortgage rates hinder market movement, despite the new Labor government’s drive to expand housing supply. is on track to achieve sales numbers of
The sector, excluding Vistry, which focuses on affordable rental housing, is expected to complete just over 50,000 homes this year, according to a Financial Times analysis of figures from seven companies compiled by Investec. production is at its lowest level since 2013.
Vistry’s stock price rose Tuesday after the company was forced to abandon the deal due to “anticipated year-end transaction and closing delays” and financial terms that were “not sufficiently attractive.” , which fell 17% as it issued its third profit warning since October.
The widespread reduction in housebuilding is a major challenge for Prime Minister Keir Starmer’s Labor government. The party is embarking on sweeping planning reforms to boost new home construction to the highest levels in more than 50 years.
Investec analyst Ainsley Ramin said: “Listed companies are generally seeing their lowest performance rates in 10 years.” He said “both supply and demand factors” were behind the recession, including high mortgage rates making it difficult for first-time buyers to buy.
Labour’s planning reforms have been welcomed by the construction industry, but the share prices of UK housebuilders have fallen by around a fifth since the Labor government’s October Budget, with renewed inflation and higher borrowing costs. There are growing concerns that the shutdown will be prolonged.
Vistry has already warned twice this year of underestimating construction costs, totaling £165 million. The company on Tuesday cut its 2024 profit forecast by a further £50m. Lamin said the new warning would “damage the group’s credibility” and “make investors even more anxious.”
Meanwhile, other sectors, including companies such as Barratt, Persimmon and Taylor Wimpey, are suffering from post-Budget interest rate concerns as they are highly sensitive to borrowing costs.
Most of these companies’ customers rely on mortgages, and many are first-time buyers who are maxing out their budgets. Mortgage interest rates remain higher than expected this year, averaging more than 5%, according to financial information provider MoneyFact.
Output for seven listed homebuilders fell 3% this year. This follows a decline of one-fifth in 2023 due to the effects of the Conservative Party’s “mini” Budget in September 2022, which caused soaring mortgage rates and put a brake on the property market. It is something.
The slump in new home completions by these companies (which also include Bellway, Barclay, Crest Nicholson and MJ Gleeson) is part of a broader contraction in housing production. Data tracking the total supply of new homes showed that homes completed in the first nine months of 2024 fell 5% compared to the same period last year.
The industry is on track to complete around 220,000 new homes this year, according to estate agent Savills, far short of the number needed to meet Labour’s target of 1.5 million over five years.
With sales down, home builders are holding off on buying land or opening new sites, reducing production and trying to avoid lowering home prices.
Many industry observers are hopeful that 2025 will mark the beginning of an economic recovery, with mortgage rates expected to fall gradually and Labour’s pro-construction reforms potentially starting to bear fruit.
RBC analyst Anthony Codling said: “The Labor government in 2024 is the most pro-housing government we can remember.” “Britain’s housebuilders have been oversold since the Budget.”
Analysts and industry groups say that unless Labor finds a way to help tougher first-home buyers buy a home and provides more funding for affordable housing, Labor will deliver 1.5 million new homes. It warns that it is likely that the target will not be achieved.
But some industry executives remain bullish. “We’re tired of the moaning,” Bellway chief executive Jason Honeyman told the FT on an October results call.
“People wanted to complain about the old government, which didn’t want new homes, and now they want to complain about the new government, which wants to build too many buildings,” he said. said. “That’s ambitious. . . It will take time for the homebuilding sector to start building again.”
