Having examined both the wider housing market’s prospects and how housebuilding stocks in general behave through the cycle, in our final look at the sector we will look more closely at picking stocks within the UK listed universe. Before that, however, it is important to look at the significant changes in the mood music that have rapidly been brought about by the new Truss administration.
Last month we speculated about how long the new government could resist bringing in more support measures for the housing market. Not for long, it transpired. The Kwarteng mini-Budget lowered stamp duty land tax (SDLT), but the changes introduced are, in practice, pretty small beer. The maximum duty cut for most buyers is only £2,500, much less than the savings on offer in the 2020 stamp duty ‘holiday’: then up to £15,000 could be saved. First-time buyers in London can save more, but the housing market in the capital is a very different beast. Needless to say, the housebuilders are not satisfied and wanted more, as the new homes industry is today getting its lowest support from the government for more than a decade.
Those still bullish on the housing market perhaps assume that lowered SDLT would help repeat the massive price surge seen in 2020 and 2021. The saving on an average priced UK house was only £1,800, but that average price then rose by almost £58,000. A repeat of this is not likely because prices are considerably higher, mortgage rates are high and rising not low and falling, there is a personal financial crisis with cost of living pressures, and the pandemic ‘race for space’ that created a substantial surge in demand is unlikely to be repeated. Many found that the rural idyll did not live up to expectations.