Housebuilders rally on report of Help to Buy extension
Shares of London-listed housebuilders rallied on Tuesday following a report the UK government is planning to extend the Help to Buy scheme.
According to the Financial Times, ministers are drawing up plans to extend the scheme - which allows buyers in England to purchase new-build properties with only a small deposit - beyond its December deadline to prevent buyers losing out because of Covid-19 delays.
The scheme, which was introduced in 2013, offers an equity loan where the government lends first-time buyers and existing homeowners money to buy a newly-built home. The purchase price must be no more than £600,000. Buyers can borrow 20% of the purchase price interest-free for the first five years as long they have a deposit of at least 5%. In London, buyers can borrow as much as 40% of the purchase price.
At 1020 BST, shares of Barratt Developments and Berkeley Group were up 4.9%, while Persimmon and Taylor Wimpey were 4% and 3.8% higher, respectively. Crest Nicholson shares were 3% firmer, while Redrow was 3.5% higher and Bellway was up 4.3%.
Liberum analyst Charlie Campbell pointed out that this would be the fourth time Help to Buy is extended.
"The Homebuyers Federation estimates that the planned taper would reduce scheme use by 40%, although we believe it is more like 33%. Any extension would be positive for the whole sector, but especially those with a higher proportion of sales to movers and at higher price points - like Crest Nicholson and Redrow," he said.
IG analyst Joshua Mahony said: "With the recent stamp duty holiday expected to spark a resurgence in demand, speculation over the potential measures such as a help-to-buy extension adds yet another string to the bulls bow.
"Fears surrounding a potential spike in bankruptcies and job losses remain an issue for banks, yet the housing sector still has the opportunity to enjoy a particularly strong period as previously hesitant movers finally take the plunge thanks to government incentives.
"Alongside the stamp duty holiday, Johnson's promise to relax planning restrictions for new builds, and invest £12 billion in 180,000 affordable homes goes to highlight the boom that could be ahead for the sector."