UK housebuilding stocks lifted by Labour election win

By Aby Jose Koilparambil and Yadarisa Shabong

(Reuters) -British housebuilding companies were the top gainers on the FTSE 100 on Friday as investors welcomed the election victory by the Labour Party, which said it wanted 1.5 million new homes to be built over the next five years.

Housing was a key part of the Labour Party's election manifesto, in which it promised to speed up home building by reforming the country's planning system.

"If election pledges turn into policy, today is more than just a new day in housebuilding, it is the dawning of a new age," said RBC Capital Markets analyst Anthony Codling.

Persimmon, Taylor Wimpey and Vistry are expected to be key beneficiaries of an increased focus on boosting affordable homes and planning reforms.

Shares in Persimmon, Taylor Wimpey, Vistry and Barratt climbed between 3.2% and 4% and were the biggest gainers on the FTSE 100 and among the top across Europe.

The UK homebuilders index jumped 3.2%.

Analysts said they expect the new government in the next 100 days to restore housing targets, reform the planning system, refine the greenbelt and increase social and affordable housing.

Other housing-related stocks also jumped on the news, with largest building materials supplier Travis Perkins, Howden Joinery and brick companies Forterra and Ibstock all climbing between 1.5% and 3.3%.

Trade body Home Builders Federation (HBF) said it would hold talks with the new government.

"The recent weakening of the planning system and the lack of capacity in local authority planning departments are the current biggest constraint on delivery," said Neil Jefferson, chief executive of HBF.

Oli Creasey, property research analyst at Quilter Cheviot, wrote in a note that the concerns on the demand front need to be addressed, and significant changes to buyer affordability "feels a way off" under the new government.

Housebuilders had pointed to weak sales for most of last year, even during the traditionally strong spring selling season in 2024, and have swiftly responded to the slowdown by scaling down home-build targets and slashing profit forecasts.

In their attempt to revive demand, they have offered a wide range of incentives, putting further pressure on margins.

British house prices fell slightly in June but are likely to rise over the rest of this year and into 2025 with interest rates expected to start falling soon, mortgage lender Halifax said on Friday.

JP Morgan analysts said potential interest rate cuts in August will also spur more appetite for the sector.

(Reporting by Aby Jose Koilparambil and Yadarisa Shabong in Bengaluru; Editing by Sonia Cheema, Alexander Smith and Gareth Jones)