Chartered builders in the UK are on track to build the fewest new homes in a decade

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Listed housebuilders in the UK are at risk of building the fewest homes for sale in a decade, as planning regulations and high rental prices stifle the market despite the new Labor government’s push to increase housing.

The sector, excluding Vistry which focuses on affordable and rental housing, is expected to complete more than 50,000 homes this year, the lowest since 2013, according to a Financial Times analysis of seven companies by Investec.

Shares in Vistry fell 17 percent on Tuesday after the company issued its third profit warning since October, blaming “delays in year-end expectations and completions” and canceling contracts because earnings “were not looking good”.

The housing boom poses a major challenge for Prime Minister Sir Keir Starmer’s Labor Government, which has launched a sweep. planning to drive new home construction to the highest level in more than 50 years.

“These listed players are hitting their lowest levels in a decade,” said Aynsley Lammin, an analyst at Investec. He said “demand and supply” – including high mortgage rates that make buying difficult for first-time buyers – were responsible for the fall.

The planned changes to work have been welcomed by the construction sector but are shared across the UK the builders have fallen by almost a fifth since the Labor government’s Budget in October, fueling fears that inflation will rise again and borrowing will rise for a long time.

Vistry has already warned twice this year about money to build countless housestotaling £165mn. It cut its 2024 profit guidance by another $50mn on Tuesday. Lammin said the new warning would “damage the integrity of the group” and “increase investors”.

The rest of the sector, including companies such as Barratt, Persimmon and Taylor Wimpey, are currently suffering from post-Budget concerns about interest rates as they are heavily influenced by borrowing costs.

Many of these companies’ customers rely on mortgages, and many are first-time buyers who are adding to their income. Mortgage rates have been higher than expected this year, up more than 5 percent on average, according to financial information provider Moneyfacts.

Out of the seven mentioned house builders fell 3 percent this year. It follows a cut of one-fifth in 2023 after the Conservatives’ “mini” Budget in September 2022, which sent interest rates soaring and put the brakes on the housing market.

The decline in new home completions by these firms – which also include Bellway, Berkeley, Crest Nicholson and MJ Gleeson – is part of the housing boom. Data that tracked the number of new homes showed that 5 percent fewer homes were completed in the first nine months of 2024, compared to the same period a year earlier.

The industry is on track to complete around 220,000 new homes this year, according to estate agent Savills, well short of the numbers needed to meet Labor’s target of 1.5mn over five years.

As sales slow down, homebuilders stop buying land and open new ones, reducing their output and trying to avoid reducing the value of their homes.

Many in the group expect 2025 to be the start of a recovery, with credit rates expected to slow and the potential for Labor’s legitimate reforms starting to bear fruit.

“The Labor 2024 government is the most supportive government to build homes we can remember,” said Anthony Codling, RBC analyst. “UK housebuilders have been on a roll since the Budget.”

Analysts and industry groups have warned that Labor could miss its target of 1.5mn new homes unless it can find ways to help first-time buyers – and give more money to affordable housing.

But some industry leaders are still strong. “I’m tired of the complainers,” Bellway chief executive Jason Honeyman told the FT over the phone in October.

“People wanted to complain about the old government that did not want new houses. And now they want to complain about the new government, who wants to build more,” he said. “It’s a desire . . . Construction takes time to rebuild”.