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UK listed housebuilders are on track to build the fewest new homes for sale in a decade, as planning rules and high mortgage rates hold the market back despite the new Labor government's push to boost housing supply.
The sector, apart from Vistry which focuses on affordable and rented housing, is expected to complete just over 50,000 homes this year, the lowest level of output since 2013, according to a Financial Times analysis of seven companies compiled by Investec.
Shares in Vistry fell 17 percent on Tuesday as the company issued its third profit warning since October, blaming “delays in expected year-end transactions and completions” and having to scrap deals because the terms were “not attractive enough”.
The massive housing boom poses a major challenge to the government of Prime Minister Sir Keir Starmer, who launched the sweep. plan update in an effort to boost new home construction to the highest level in more than 50 years.
“Listed players are delivering their lowest results in a decade,” said Aynsley Lammin, an analyst at Investec. He said “both demand and supply” — including high mortgage rates that make buying difficult for first-time buyers — were behind the downturn.
The workforce planning reform has been welcomed by the construction sector but shares in the UK the house builders have fallen around a fifth since the Labor Government's Budget in October, which raised fears of a resurgence in inflation and borrowing costs that remain at long-term highs.
Vistry has already warned twice this year about calculated below the cost of constructiona total of £165mn. It cut its profit guidance to 2024 by another £50mn on Tuesday. Lammin said the new warning would “damage the credibility of the group” and “other disinterested investors”.
Some sectors, including companies such as Barratt, Persimmon and Taylor Wimpey, are currently suffering from post-Budget concerns about interest rates because they are highly sensitive to borrowing costs.
Many of these corporate buyers depend on mortgages, and many are first-time buyers who are stretching their budgets to the max. Mortgage rates remain higher than expected this year, by more than 5 percent on average, according to financial information provider Moneyfacts.
Results for all seven listed house builders down 3 percent this year. This follows a one-fifth drop in 2023 after the Conservatives' “mini” Budget in September 2022, which led to rising mortgage rates and hit the brakes on the property market.
The decline in new home completions for these companies – which include Bellway, Berkeley, Crest Nicholson and MJ Gleeson – is part of a wider reduction in housing production. Data tracking the overall supply of new housing showed 5 percent fewer homes completed in the first nine months of 2024, compared to the same period a year earlier.
The industry is on track to complete around 220,000 new homes this year, according to estate agent Savills, well short of the numbers needed to reach the Labor target of 1.5mn over five years.
As sales have slowed, homebuilders have backed away from buying land and opening new sites, reducing their production and trying to avoid lowering their home prices.
Many in the sector are hoping that 2025 will be the start of a recovery, with mortgage rates expected to gradually decline and the possibility of Labor structural reforms beginning to bear fruit.
“The 2024 Labor government is the best housing government we can remember,” said Anthony Codling, RBC analyst. “UK housebuilders have sold off since the Budget.”
Analysts and industry groups have warned that Labor could miss its target of 1.5mn new homes unless it can find ways to help first-time buyers buy a home – and provide more funding for affordable housing.
But some business executives are still working. “I'm fed up with the complainers,” Bellway chief executive Jason Honeyman told the FT on the October results call.
“People wanted to complain to the old government, which did not want new homes. And now they want to complain about the new government, who want to build too many,” he said. “There are ambitions . . . The housing sector is taking time to start rebuilding”.