Housebuilder shares lead rally after landslide Labour election win

Housebuilder shares lead rally after landslide Labour election win

Housebuilder shares lead rally after landslide Labour election win

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Housebuilding companies led a rally in UK stocks on Friday as the Labour Party overwhelmingly won the general election on a platform that includes a big boost to housebuilding and urgent pro-development planning reforms.

By mid-morning, Persimmon was up 4.5%, while Vistry was up 4.6%, Barratt Developments was up 3.5% and Taylor Wimpey was up 2.8%. The FTSE 250 index of domestic-focused mid-caps was up 1.3%.

“We see this political shift as a big positive for UK housebuilders,” said Jefferies analyst Glynis Johnson. “A Labour-led government appears more supportive, engaged and focused on housebuilding.”

Labour has won support from housebuilders in the run-up to the July 4 vote, with promises to build 1.5 million new homes over five years of government and a series of pro-development policy changes.

Sir Keir Starmer’s party has promised to immediately reinstate hardline housing targets for local governments, which became “advisory” under the Conservative government.

Labour has also promised to review the boundaries of green belts, which hamper development around big cities, and to quickly identify sites for several large-scale “new towns”.

Stewart Baseley, chief executive of the Home Builders Federation trade group, told the Financial Times during the election campaign that the Conservatives had given up 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 an uphill task in meeting its house-building targets, which equate to 300,000 new homes a year on average. No government has built that many homes a year since the mid-1970s, when the government halted large-scale public housing construction.

“With one in five children living in overcrowded conditions and 4.2 million people in need of social housing, 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 fall sharply to just half the new government’s target as high interest rates discourage buyers.

Housebuilders are likely to put pressure on Labour to offer more support to buyers, particularly first-time buyers, beyond its promise to make an existing mortgage guarantee scheme permanent.

Chronic under-delivery of new homes has contributed to housing prices rising even further beyond the reach of incomes and to a shortage of rental housing.

David Thomas, chief executive of Barratt, the UK’s largest housebuilder, said: “The country urgently needs more new homes, of all types and tenures.”