Housebuilding companies were the biggest winners in the markets following George Osborne’s announcements in the Autumn Statement.
Housebuilding stocks, such as Persimmon, Taylor Wimpey, Barratt Developments and Berkeley Group, all jumped on the news of Osborne’s housing sector reforms.
The companies rallied after George Osborne revealed plans to unveil a housebuilding programme, including building 200,000 starter homes for first-time buyers at a 20 per cent discount, and a doubling of the housing budget to £2bn a year. He also revealed plans to relax shared ownership restrictions and reform the planning system to build more homes.
While housing stocks were up around 5 per cent midway through the Autumn Statement, they fell back to be 3 per cent up on the news of an increase in stamp duty tax for buy-to-let investors, which “took the shine” off the positive news, says Laith Khalaf, senior analyst at Hargreaves Lansdown.
“Affordable housing is a big issue in the UK today and the government looks to be responding by turning on the supply taps. First-time buyers are likely to benefit from the plans, but so are the developers who are going to going to build the hundreds of thousands of starter homes ordered by George Osborne,” says Khalaf.
“House builders Taylor Wimpey and Persimmon are near the top of the leader board, helped by the Government’s renewed commitment to increasing the supply of new dwellings,” says Russ Mould, investment director at AJ Bell.
However, obstacles remain for housebuilders, says Julian Chillingworth, CIO at Rathbones.
“We all know there’s a chronic housing shortage, but the major obstacle to progress remains the planning system.
“There was a degree of anticipation for a bigger fillip to house-builders, so short-term traders have taken profits, which is why we are seeing the sector come off. But the latest announcement is likely to favour those more geared into social and affordable housing versus buy-to-let,” says Chillingworth.
Elsewhere in markets defence companies rebounded, on the news of an increased defence budget. Osborne announced that £6bn of additional defence budget will be allocated by 2020/21.
Rolls Royce was one of the firms to see a boost, after a particularly tumultuous period for the company.
“Rolls Royce is one of the largest manufacturers of defence aerospace engines and this extra spending will apply some balm to an embattled company, which has issued five profit warnings in less than two years,” says Khalaf.
Meanwhile, infrastructure-related stocks were also boosted by the news from the Chancellor of an increased spending commitment to the UK’s roads and railways.
“Infrastructure-related plays are also enjoying small gains today as investors reflect on the Chancellor’s £61bn commitment to boosting Britain’s roads, railways and flood defences. WS Atkins is up 3 per cent while Balfour Beatty and Renew Holdings are up 2 per cent,” says Mould.
Outsourcing companies were not left out of the rally, with firms such as Capita and Compass Group benefiting from the news of Government cost cutting.