Investment bank Jefferies has said investors should ‘Buy’ shares in UK housebuilders like Persimmon and Taylor Wimpey ahead of this week’s Spring Statement.
Chancellor Rachel Reeves is set to present her Spring Statement later this week. Due to her commitment to just one major fiscal event, it was intended as an update rather than a budget.
However, the Chancellor is widely expected to make significant policy updates in the speech, which could stretch into housing policy.
“With frequent and recent reiterations of the govt target to build 1.5m homes over the term of parliament, we believe there is potential for further support for the housebuilding sector to be unveiled,” said Jefferies analysts in a research note today.
Last year saw the lowest number of new homes built in a twelve-month period since 2017 (excluding the pandemic), with only 217,911 homes completed.
This compares to the average of 300,000 a year that the government will have to reach to meet its 1.5m target.
“At this stage we believe neither forecasts nor valuations include any upside from demand-side measures, and we would look to own UK housebuilders into this event,” Jefferies analysts said.
Jefferies currently rates every UK-listed builder, including Persimmon and Taylor Wimpey either a Hold or Buy, while also rating infrastructure firms that focus on construction, like Balfour Beatty, a Buy.
The analysts noted that at its peak in 2018-19, the Help to Buy shared equity programme facilitated the purchase of more than 50,000 new-build homes.
This programme was then restricted in 2021 to first time buyers with regional pricing caps, causing purchases through the plan to fall to around 30,000 homes.
Taylor Wimpey would benefit from Help to Buy reintroduction
Any reintroduction of measures to support Help to Buy in the Spring Statement would likely be a major boost to the sector.
“A key barrier for homebuyers is actually rooted in the very start of the process: property development,” explained Tony Hall, head of business development at mortgage broker Saffron for Intermediaries.
Another change suggested by Hall that could boost housebuilders included standardising planning processes across local councils to remove inconsistency between boundaries.
However, Hall warned that based on recent reports from its contents, it was “unlikely” we would see any major announcements at the Spring Statement.
UK housebuildersJefferies ratingBarratt RedrowBuyBellwayBuyBerkeley GroupHoldCrest NicholsonBuyPersimmonBuyTaylor WimpeyBuyVistry GroupHoldWatkin JonesHold