UK housing demand seen recovering on clearer post-Budget outlook
Analysts expect pent-up demand to bolster the traditional spring selling season as buyers return to the market
[BENGALURU] The demand for new homes could gradually recover in 2026, giving British homebuilders a much-needed boost, analysts and some investors said after finance minister Rachel Reeves’ Budget cleared the uncertainty that held buyers back.
Shares of homebuilders such as Berkeley, Barratt Redrow and Persimmon, were about 1 to 3 per cent higher on Thursday (Nov 27), having fallen on Wednesday after the Budget which increased taxes on pensions and savers.
There was no change to the stamp duty, the tax paid when somebody buys a home, and improving debt forecasts helped to push government bond prices up.
This typically leads to a more favourable lending environment for banks and lower long-term mortgage rates for borrowers, analysts said.
They also expect a new tax on homes valued over £2 million (S$3.4 million) to have little effect on the broader housing market.
‘A good first step’
“The stability of the market (after the Budget) is a good first step,” said James Thorne, portfolio manager at Columbia Threadneedle Investments, an investor in the major UK-listed homebuilders.
Uncertainty over the Budget has hurt sales in recent weeks, with five of the seven major listed homebuilders posting slower sales since October. The companies declined to comment on the Budget.
Based on data from property website Zoopla, uncertainty over the Budget had led to an 8 per cent year-on-year drop in homebuyer demand in October.
Analysts at Investec and Barclays expect pent-up demand to support the traditional spring selling season as some buyers return to the market.
New charges on homes worth more than £2 million
Reeves introduced an annual tax in England that starts in 2028, of £2,500 for homes worth more than £2 million, increasing to £7,500 for properties valued over £5 million.
She also increased the tax paid by landlords on rental income.
Analysts do not believe that the surcharge will hurt the sub-£2 million market, and see only a small impact from the property income tax on the buy-to-let market.
“The reality is that the main part of the housing market is pretty unscathed,” Investec analyst Aynsley Lammin said.
Berkeley, which builds more high-end homes across London than its rivals, is likely to be hit the hardest among the listed firms, Barclays analyst Rajesh Patki said in a note.
Berkeley’s shares fell as much as 5 per cent after details of the Budget were unexpectedly released early on Wednesday. They were up 0.7 per cent on Thursday.
The homebuilders sub index was last up 1 per cent.
Government wants to build 1.5 million new homes
The government last month pledged to streamline planning rules to help meet its target of building 1.5 million homes before the next election – a move investors see as more significant for the sector than Wednesday’s Budget.
Expectations for lower Bank of England interest rates remain unchanged following the Budget, which analysts also view as supportive for affordability.
Still, some in the industry warned that Reeves missed an opportunity to boost demand.
“If the government fails to address the viability and affordability constraints, its housing ambitions will become increasingly unachievable,” said Steve Turner, executive director of the Home Builders Federation.
Goodbody analyst Shane Carberry described the Budget as an “okay” outcome for the homebuilders, but the backdrop remains sluggish. REUTERS
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