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Housing

UK Homebuilders Face Slow Build Despite Government Support Hopes

Strategic Insights

— 2 min read

The UK homebuilding industry is still facing challenges despite the government's hopes of increasing support for local authorities to construct affordable housing. The four FTSE 100 homebuilders - Barratt, Redrow, Berkeley Group, and Taylor Wimpey - have delivered a 35% return to shareholders since Labour's 1.5mn new homes pledge, but a more recent bet has produced a 12% loss. According to property agent Savills, only 180,700 homes were constructed in the 12 months to March, which is a rate that has not been achieved in over 50 years.

Key Takeaways:

  • The UK government's hopes of increasing support for local authorities to construct affordable housing have not yet been implemented, leading to a slow build in the homebuilding industry.
  • The four FTSE 100 homebuilders - Barratt, Redrow, Berkeley Group, and Taylor Wimpey - have delivered a 35% return to shareholders since Labour's 1.5mn new homes pledge, not including dividends.
  • A more recent bet on the government's ability to take action and increase homebuilding has produced a 12% loss.
  • The industry is constrained by existing constraints such as a shortage of skilled labor and materials, including bricks.
  • The use of cheaper government-backed financing is welcome, but it will not ease these existing constraints.
  • The FTSE 100 four homebuilders have valuations at about 13 times forecast earnings, which is above their 11-12 average of the past five years but below their peaks of about 16 times in the wake of the 2023 pledge.
  • The industry is expected to begin building on more sites from late 2026, but only if planning gets easier.

Statistics:

  • 1.5mn new homes: Labour's pledge that has been consistently below target of 300,000 new builds per year.
  • 180,700 homes: The number of homes constructed in the 12 months to March, according to property agent Savills.
  • 35%: The return to shareholders delivered by the four FTSE 100 homebuilders since Labour's 1.5mn new homes pledge.
  • 12%: The loss produced by a more recent bet on the government's ability to take action and increase homebuilding.
  • 13: The number of times forecast earnings by which the FTSE 100 four homebuilders are valued.
  • 50: The number of years since the last time the homebuilding industry achieved a rate of 300,000 new builds per year.
  • 2/5: The predicted shortfall in the government's 2029 target, according to property agent Savills.

Sources:

  • "UK homebuilders face slow build despite government support hopes" by the Financial Times
  • Savills, "UK Housing Market Outlook" (2024)
  • LSEG, "FTSE 100 Index" (2024)
  • Bloomberg, "UK Homebuilders Face Slow Build Despite Government Support Hopes" (2024)

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