The UK is facing a chronic housing shortage, but housebuilders’ shares have taken a hammering in recent months. On the surface it is a conundrum. However, there are many forces at play.
This year's changes to stamp duty have been inflationary at the bottom end of the London market and deflationary at the top. As a result, confidence and sentiment have been badly hit. The EU referendum then heaped on a layer of uncertainty, depressing share prices further. The sector is also being hamstrung by a shortage of skills and some materials.
In the year to date, shares in Berkeley Group have fallen 34 per cent, Taylor Wimpey's are down 28 per cent and Barratt's 25 per cent. However, some analysts are bullish on the longer term fundamentals for housebuilders given the government target of building one million new homes by 2020. Meeting the target will not be easy. For starters, more land needs to be ready for development. As Berkeley's chief executive Rob Perrins has said: “It's about electricity. It's about gas. It's about adjoining land permissions. It's about all the infrastructure issues around getting land ready, and there are an awful lot of those.”
The government has an opportunity to tackle the crisis in an upcoming white paper on housing, now expected in January. It has raised the prospect of a clampdown on housebuilders that do not develop land quickly enough. Ministers would do well to embark on a drive to get land ready for development, too.
Meanwhile, Berkeley, which has interim results on Friday, has engaged in some self-help in solving the skills crisis: it has reached over 500 apprentices for first time and pledges to triple the number in training by 2018. This underscores that the solution to the housing shortage is likely to involve initiatives from both industry and government.
Britain needs to build more homes of every single type but real growth will come from more construction in the middle of the market which, crucially, people can afford. That is where efforts should be concentrated, and soon, or the crisis will rumble on, much to shareholders' chagrin.