Rolling coverage of the latest economic and financial news
17m agoIntroduction: UK housebuilder stocks soar on new homes scheme
Adrian Kearsey, an analyst at the broker Panmure Liberum, notes there are still few details on how exactly the scheme will work. He wrote this morning:
Conversations with housebuilders over the weekend indicated that while they welcomed the news, they recognise the need to discuss the practicalities of implementation in the coming weeks.
He adds that the key winners are likely to be housebuilders with a lower price product, such as MJ Gleeson (which has shot up 19% this morning) and Persimmon (up 16%).
At this stage it is unclear what the income and property value caps are going to be. Even if they are relatively generous, it is likely that higher price point developers (such as Berkeley Group, not rated) benefit as much. At this stage it is unclear what level of financial contribution the housebuilders will be required to make to participate in the scheme. If this hurdle is too high, then developer take up may be limited. Moreover, even a moderate contribution may preclude those housebuilders with stretched balance sheets (e.g. Crest Nicholson).
At this stage it is unclear what the income and property value caps are going to be. Even if they are relatively generous, it is likely that higher price point developers (such as Berkeley Group, not rated) benefit as much.
At this stage it is unclear what level of financial contribution the housebuilders will be required to make to participate in the scheme. If this hurdle is too high, then developer take up may be limited. Moreover, even a moderate contribution may preclude those housebuilders with stretched balance sheets (e.g. Crest Nicholson).
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
UK housebuilder stocks are flying this morning as investors rejoice at a new homes scheme for first-time buyers in England.
Shares in Barratt Redrow have surged 14%, making it the best performer across the FTSE 100. Housebuilders are dominating the FTSE 250 index too, with Vistry, Persimmon, Taylor Wimpey and Bellway all up between 14% and 16% this morning.
It comes after Andy Burnham unveiled plans over the weekend for a new help-to-buy scheme.
The programme, called “Your first home”, is intended to help buyers in England who have a regular income but have been unable to save for a large deposit or don’t have financial support from their family.
Under the scheme, first-time buyers will get a 20% equity loan to help them buy a new-build home, with an initial interest free period and a requirement of a minimum deposit of just 2.5%.
There will be household income caps and a deposit cap to exclude those on the biggest salaries and with big savings pots. There will also be price caps on the value of the properties.
Richard Hunter, head of markets at the broker Interactive Investor, said the new policy would be a welcome boost for the industry.
The housebuilding sector has been beleaguered by a raft of headwinds ranging from higher mortgage rates and strained affordability to a slow planning process for new homes and the announcements have provided a rare and overdue relief rally from investors.”
The agenda
Today: Labour party conference day 2
7am BST: Aldi full-year results
11am BST: MPC member Dave Damsden speaks in London on quantitative tightening
