UK housebuilders surge on Labour victory
By Abigail Townsend
Date: Friday 05 Jul 2024
(Sharecast News) - Shares in UK housebuilders jumped on Friday, on hopes that the new Labour government would reinvigorate the sector.
The Labour Party, which has won the UK general election by a historic landslide, pledged in its manifesto to overhaul the planning system and boost housing stock.
Markets generally showed a muted reaction to the election result, with the FTSE 100 up just 21 points at 8,262.91 as at 1030 BST.
But housebuilders bucked the trend. Crest Nicholson surged 7% at 261.8p, while Barratt Developments put on 3% at 508p and Taylor Wimpey 4% at 154.25p. Persimmon was 4% stronger at 1,491.41p, Vistry Group rose 5% to 1,318p, and Berkeley Group Holdings was up 3% at 4,846p.
Crest Nicholson got an added boost from a report that Avant Homes, which is owned by investment firm Elliott Advisors, has tabled a secret takeover offer for housebuilder. According to Sky News, Avant Homes made an all-share proposal to the board of Crest last month.
The bid, which City sources said had been rejected by Crest's board in the last ten days, would have seen Elliott become the biggest shareholder in the combined group, according to insiders.
RBC Capital Markets said: "The Labour Party has won a big majority and has big plans for housebuilding. If election pledges turn into policy, today is more than just a new day in housebuilding, it is the dawning of a new age.
"In the next 100 days, we are likely to see the reinstatement of housing targets, the refining of greenbelt and the reform of planning, and by the end of the year the newest version of Labour may have announced a new generation of new towns.
"Over the last few years, housebuilders' potential has been hamstrung, but over the next few this potential is likely to be unleashed."
It flagged Taylor Wimpey, Persimmon, Vistry and MJ Gleeson - up 1% at 537.64p - as the most likely short-term winners. Its one-year top picks are Taylor Wimpey, Gleeson and Bellway, which rose 2% at 2,718.76p.
JP Morgan said it was also taking a more positive stance on the sector, flagging expected interest rate cuts, "which we believe will spur further appetite for the sector", and earnings momentum.
Its 'overweight' recommendations, which it sees as "key beneficiaries of increased focus on boosting affordable homes and a reform to planning" are Persimmon, Taylor Wimpey and Vistry.
It is also 'overweight' on Barratt, and 'neutral' on Bellway, Berkeley and Redrow. It remains 'underweight' on Crest Nicholson.
Jefferies added: "We see the election as positive for UK housebuilders. For the sector, it's less about the variation in macro outcome as the result of who wins, but more that a government led by Labour appears more supportive, engaged and focused on delivery of homes.
"The election outcome does not change our stock preference - Taylor Wimpey, Persimmon - although marginal winners from a Labour government could be Vistry and Persimmon."
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