Labour's landslide victory sees U.K. housebuilder stocks surge

By Louis Goss

The Labour Party's landslide victory in the U.K.'s general election pushed up shares in Britain's top housebuilders on Friday morning as investors were optimistic that Keir Starmer's new government will push forward with plans to build 1.5 million new homes over the next five years.

In its manifesto published in June, the Labour Party outlined plans to fix Britain's housing crisis by reinstating mandatory house building targets and overhauling the U.K.'s planning regime which is widely considered to be a major block to the construction of new homes.

"Labour will get Britain building again, creating jobs across England, with 1.5 million new homes over the next parliament," the party's manifesto says. "Labour will deliver the biggest increase in social and affordable housebuilding in a generation."

Shares in Britain's FTSE-100 housebuilders increased on Friday morning as it became increasingly clear that the Labour Party has won a sizable majority in the U.K.'s House of Commons that will let it make good on its manifesto promises.

See: U.K. Labour Party sweeps to power in historic election win

Barratt Developments (UK:BDEV), Britain's biggest house builder by revenue, jumped 4% on Friday morning as shares in its rivals also surged in a rally that saw Bellway (UK:BWY) shares increase 3%, Taylor Wimpey (UK:TW) shares rise 4% and shares in Persimmon (UK:PSN) increase 5%.

Analysts at RBC, led by Anthony Codling, said Labour's landslide victory could now mark the "dawning of a new age" for the U.K.'s housebuilding sector if "pledges turn into policy"

"If Labour's housing pledges become policies we believe that the scene will be set for a period of significant growth in the supply of new homes," RBC's analysts said, as they suggested "policy changes made now should have a significant and far-reaching impact on the future."

The Labour Party's manifesto pledges include plans to let more new homes to be built on 'Green Belt' land, which is currently protected from development, by allowing construction on lower quality plots of the undeveloped land that surrounds Britain's major towns and cities.

RBC's analysts said Bellway, Crest Nicholson (UK:CRST), Redrow (UK:RDW) and Taylor Wimpey currently own more land than their rivals in local authorities with greenbelts, meaning they will likely benefit most from the opening up of 'Green Belt' land.

Labour's manifesto also outlines plans to build "a new generation of new towns" across Britain, streamline the country's planning system to speed up the pace of housebuilding, and reinstate mandatory housing targets that require local authorities to build more homes.

RBC's analysts said all of the U.K.'s housebuilders are likely to benefit from reinstated housing targets due to "the simple fact that these targets (300,000 pa) are significantly higher than current volumes."

The Labour Party's manifesto also pledges to see the party use planning regulations to force housebuilders to construct more affordable homes in their developments.

RBC's analysts noted that both Gleeson (UK:GLE) and Vistry (UK:VTY) currently go beyond social housing requirements imposed on them by the existing planning regime, meaning they are most likely to benefit from any increased requirements.

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-Louis Goss

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07-05-24 0613ET

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