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UK listed housebuilders are on track to build the fewest new homes for sale in a decade, as planning rules and high mortgage rates hold back the market despite the new Labor government’s push to increase housing supply.

The sector, excluding Vestry, which focuses on affordable housing and rentals, is expected to complete just over 50,000 homes this year, the lowest level of output since 2013, according to a Financial Times analysis of figures for seven companies compiled by Investec.

Vestry shares fell 17 per cent on Tuesday, as the company issued its third profit warning since October, blaming “delays in transactions and completions expected at the end of the year” and having to abandon deals because financial terms “were not sufficiently attractive.” “It’s enough.”

The widespread contraction in the housebuilding sector poses a major challenge to the Labor government of Prime Minister Sir Keir Starmer, which has launched a sweeping campaign. Planning reforms In an effort to boost new home construction to the highest level in over 50 years.

“The listed players are broadly at their lowest level of achievement in a decade,” said Ainsley Lamin, an analyst at Investec. He said “demand and supply factors” — including higher mortgage rates that make purchasing more difficult for first-time buyers — were behind the recession.

The construction sector has welcomed Labour’s planning reforms but shares in the UK Home builders have fallen By about a fifth since the Labor government’s budget in October, raising fears that inflation will return and borrowing costs will remain high for longer.

Vestry has already warned twice this year Construction costs are incompleteA total of £165 million. It cut its 2024 profit guidance by a further £50m on Tuesday. Lamin said the new warning would “damage the group’s credibility” and “further unnerve investors.”

Meanwhile, the rest of the sector, including companies such as Barratt, Persimmon and Taylor Wimpey, has suffered from post-Budget concerns over interest rates because it is highly sensitive to borrowing costs.

Most of these companies’ clients rely on mortgages, and many of them are first-time buyers and stretching their budgets to the maximum. Mortgage rates have remained higher than expected this year, above 5 percent on average, according to financial information provider Moneyfacts.

Output via the seven mentioned Home builders It fell 3 percent this year. It follows a five-fold decline in 2023 following the Conservatives’ “mini” Budget in September 2022, which sent mortgage rates soaring and suppressed the property market.

The contraction in new home completions by these companies – which also include Bellway, Berkeley, Crest Nicholson and MG Gleason – is part of a broader contraction in housing production. Data tracking total new housing supply showed a 5 percent decline in completed homes in the first nine months of 2024, compared to the same period the previous year.

The industry is on track to finish about 220,000 new homes this year, according to property developer Savills, far short of the numbers needed to meet Labour’s target of 1.5 million homes over five years.

As sales declined, homebuilders pulled back on buying land and opening new sites, cutting their production and trying to avoid having to lower the prices of their homes.

Many in the sector are hoping that 2025 will be the start of a recovery, with mortgage rates expected to gradually fall and Labour’s pro-building reforms potentially starting to bear fruit.

“The 2024 Labor government is the most pro-home building government we can remember,” RBC analyst Anthony Codling said. “UK housebuilders have been oversold since the Budget.”

Analysts and industry groups have warned that Labor is likely to miss its target of building 1.5 million new homes unless it can find ways to help more distressed first-time buyers buy a home – and provide much greater funding for affordable housing.

But some industry executives remain optimistic. “I’m tired of the complainers,” Bellway CEO Jason Honeyman told the Financial Times in an October results call.

“People wanted to complain about the old government, which didn’t want any new homes. Now they want to complain about the new government, which wants too many.” “It’s ambitious. . . “It takes some time for the home building sector to start building again.”