By continuing to use this site you consent to the use of cookies on your device. Find out more about our cookie policy and the types of cookies we use by clicking here

Houses and Cars in Focus for Wednesday's Budget

AUTUMN BUDGET 2017: How does the Government's pledge to build 300,000 houses a year affect UK investors?

James Gard 20 November, 2017 | 2:15PM

Budget box

Chancellor Philip Hammond will deliver his Budget speech on Wednesday, his first since June’s snap election but his second of the year as the UK switches from spring to an end-of-year economic statement.

Brexit negotiations and the final “divorce” bill, as well as threats to Prime Minister Theresa May’s leadership, form the political backdrop to his speech. But the Chancellor is expected, among other things, to turn his attention to two particular British obsessions: houses and cars.

The Conservative Party since 2010 has intervened in the housing market in a number of ways, from the Help to Buy scheme to imposing higher stamp duty on buy-to-let landlords.

But this week’s Budget speech is expected to set a 300,000 target for housebuilding in England, a near 40% rise on last year’s total of homes built.

How has this news affected listed housebuilders, which are popular with UK investors for their high dividends and strong capital growth in recent years, even factoring in a brief slump after the Brexit vote? On a stable day for listed shares generally, firms like Barratt Developments (BDEV), Persimmon (PSN), Taylor Wimpey (TW.), and Berkeley Group (BKG) were among the biggest risers. Away from the FTSE 100, Bovis Homes (BVS) was also higher.

Last week Barratt Developments said that its business was being “supported by an attractive lending environment” and rising consumer demand. In an update covering the period from July to November it said that forward sales were over 8% higher than the same period last year at nearly £2.9 billion. After a push from 600p to 700p in October, the company’s shares have weakened since and are now trading around 630p.

Taylor Wimpey also said last week: “While we are alert to potential political and economic risks, demand for new housing remains high across the UK and market conditions are favourable.”

Housebuilders are often criticised by the public for not building enough homes to satisfy demand, especially among younger people. But the companies counter by blaming planning constraints at a local government level for delays in development. Investors in UK housebuilders will be hoping that the Budget creates the right incentives for developers to start unlocking their substantial landbanks.

The Chancellor also revealed at the weekend that Britain would see self-driving cars on its roads by 2021 as the Government removes some of the obstacles to testing the vehicles.

SMMT chief executive Mike Hawes said: “We support government’s measures to make the UK one of the best places in the world to develop, test and sell connected and autonomous vehicles. These vehicles will transform our roads and society, dramatically reducing accidents and saving thousands of lives every year, while adding billions of pounds to the economy.”

UK investors have to look to the US for listed companies already involved in autonomous vehicles as part of their drives to develop artificial intelligence. Firms such as Tesla (TSLA), Amazon (AMZN) and Google parent company Alphabet (GOOGL) have seen strong share prices in recent years as they have embraced the technology of the future. 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
Alphabet Inc A1,059.00 USD0.67
Amazon.com Inc1,170.39 USD0.13
Barratt Developments PLC629.50 GBX0.24-
Bovis Homes Group PLC1,143.00 GBX-1.21-
Persimmon PLC2,647.00 GBX-1.30-
Taylor Wimpey PLC201.50 GBX-1.13-
Tesla Inc337.77 USD2.69
About Author

James Gard  is subeditor for Morningstar.co.uk