Shares in leading housebuilders rallied sharply on the government’s new plan to help first-time buyers of new homes. Shares in Barratt Redrow (LON BTRW) rallied 14% while Taylor Wimpey (LON:TW) jumped 15% and Vistry (LON:VTY) jumped 17%.
Help for first-time buyers
The ‘Your First Home’ scheme will be open to first-time buyers in England and will only apply to new-build houses. Buyers with a 2.5% deposit will be able to apply for a loan of up to 20% of the value of a new property.
Details have yet to be finalised, but there is expected to be an initial interest-free period for the equity loan. Funding is expected to come from existing budgets, with housebuilders expected to pay towards the running costs of the scheme.
The original ‘Help To Buy’ programme was introduced in 2013 and ran until 2023 through various guises. Initially it allowed any buyer with a 5% deposit to obtain a 20% loan on any property worth up to £600,000.
The scheme was used to fund more than 385,000 property purchases with first-time buyers accounting for the majority of applicants. The Home Builders Federation welcomed the new scheme saying it had long called for action ‘to improve access to home ownership’.
Today’s reaction to the government’s new plan isn’t surprising given how beaten-up the sector was. In the case of Vistry, there was also a large short position so the rally has elements of a short-squeeze.
There isn’t much information available on the scheme so far, as full details are set to be unveiled in the Autumn Statement. Whether it actually makes homes more affordable is debateable, because housebuilders will likely raise their prices as they did with ‘Help To Buy’.
Hats off to those who ‘rented’ the sector for the rally, but we aren’t fans from a fundemantal viewpoint. We certainly aren’t inclined to chase the stocks, although some of the suppliers and distributors look interesting.
