Housebuilders and hospitality companies have emerged as some of the biggest winners off the back of the spring 2021 budget as chancellor Rishi Sunak unleashes a wave of further fiscal stimulus to ensure the hardest hit areas of the economy receive ongoing support.
In his second budget Sunak announced plans to extend the stamp duty land tax holiday, which was set to end at the end of this month, until 30 June. Under the scheme introduced by the government last year prospective house buyers have only had to pay tax on the amount over £500,000. The floor for paying stamp duty will remain at £250,000 until the end of September.
Alongside this he revealed a government-backed guarantee to mortgages with deposits of just 5% to help more people get on the property ladder.
The chancellor also outlined continued support for the hard-hit hospitality sector in his £352bn worth of Covid relief measures, by freezing the reduced 5% VAT rate on hospitality and tourism for another six months until 30 September.
The chancellor also pledged start-up grants of up to £5bn to get the high street back on its feet, with cash-strapped leisure and hospitality companies entitled to grants of over £18,000.
Persimmon, Barratt and Taylor Wimpey shares surge
Following the wave of fiscal stimulus measures, the housebuilders led the FTSE 100 risers on Wednesday afternoon, with Persimmon leading the pack with shares up 5.8% at £28.67, followed by Barratt Developments, up 5.7% at £7.23, and Taylor Wimpey jumped 5.1% at £1.74.
Brooks Macdonald CIO Edward Park said the twin housing measures should be supportive for the housebuilding sector in 2021.
Even with the stamp duty holiday in place for the latter part of 2020 UK housebuilders saw a “dramatic” 30% fall in earnings growth last year, following on from a 6% drop in 2019, Park said.
Though the mortgage scheme includes new and secondary properties “stabilising house prices will help support the recovery for the housebuilder sector in 2021,” Park said.
Tom Brown, managing director of real estate at Ingenious, said the extension of the stamp duty holiday and government-backed mortgage guarantee initiatives “reflect the importance of maintaining optimism in the UK housing market”.
“This level of support shows that the government continues to view the housing market as key to the UK economy at a time when the latest Nationwide House Price report confirmed that demand from buyers is being sustained.”
Janus Henderson global equity portfolio manager Stephen Payne said although ongoing support for the “all-important housing market” was always likely, it remains to be seen whether the measures will be enough to stabilise growth.
“The new government mortgage guarantee scheme for high LTV mortgages is clearly targeted at helping ‘generation rent’ become ‘generation buy’,” Payne said.
“This should be well received by the housebuilding sector, although a similar scheme before saw only limited uptake in actuality.”
Question remains whether high street and hospitality can hold up
Britain’s biggest travel and leisure companies also saw massive upward share price movements on Wednesday with Premier owner Whitbread and British Airways parent IAG, each up over 5%.
Looking across to the more domestically focused FTSE 250 beaten up businesses like pub chain JD Wetherspoon, cruise operator Carnival and Cineworld were among the big winners, with the latter up 9%.
“Investors have increasingly been looking ahead to greener, post-pandemic, pastures but the big question is whether some of these companies will fail before the economic recovery can take hold,” Park said.
“The extension of the UK furlough scheme, hospitality VAT cuts and universal credit uplifts will help support consumer demand whilst business rate holidays and grants should secure the consumer sector’s balance sheets for the short term.”
