Planning applications just hit a 10-year high! Time to buy housebuilders?

Back in September 2025, I published an article on the UK’s listed brick producers, noting how brick deliveries had risen sharply from the lows seen in late 2023.

At the time I highlighted recently-increased volume guidance from several big housebuilders, but suggested that brick producers looked the better play to me at that time.

One reason for this was that an increase in brick shipments would provide a rapid lift to profits for brick producers as capacity utilisation rose. In contrast, housebuilders’ profits came later in the day and are more vulnerable to political and macroeconomic pressures.

My plan was always to follow up with a look at housebuilders and my attention was recently caught by the news that planning applications for new housing in England hit a 10-year high in 2025. 

Is it time to take a closer look at housebuilders?

Refilling the pipeline?

It’s no secret that new housing starts have plummeted since 2023, reaching a post-pandemic low ahead of the Autumn Budget in 2024. But recent data do give me some hope that a gradual recovery might be underway.

Last year saw a sharp rise in new housing orders for construction (contracts signed to build new housing). These rose by 14% sequentially during the final quarter of last year and were also 12.6% higher than the same period one year earlier:

Data source: ONS

There are also signs the medium-term pipeline of planned housebuilding might be improving.

Planning applications for new homes in England reached a 10-year high during the final quarter of last year, according to planning services specialist TerraQuest:

Source: TerraQuest (l-r 2020 - 2025)

TerraQuest’s data shows that planning permission was sought for 335,387 new housing units in 2025, more than 50% above the level of applications seen in 2024.

There is a caveat here, of course. Planning approvals in England have fallen in each of the last four years:

Source: Ministry of Housing, Communities & Local Government

Regardless of the cause of this decline – planning delays, policy uncertainty or housing market conditions – we don’t know if approvals will accelerate in 2026.

Commentary in January from industry body the Construction Products Association is also downbeat, highlighting a difficult balance between affordability and viability:

For house builders, there is an increasing trade-off between buyer affordability and development viability. In areas where demand has been sustained, properties are affordable, but site viability has been affected by a growing list of additional costs imposed by the government, especially for smaller house builders. In areas where site viability has been maintained due to higher house prices, demand and affordability remain the key constraints.

Of course, trade bodies like the CPA are not impartial observers. They are hoping (and probably lobbying) for a new government stimulus scheme to improve demand (my bold):

An increase in current house building volumes would require a sharp rise in demand during the key Spring selling season for the major house builders, and at this stage, this appears unlikely in the absence of demand-side stimulus. Private housing output is forecast to grow by only 1.5% in 2026, revised down from a forecast of 4.0% in Autumn.

Does this downbeat view mean that there are no opportunities in housebuilders? Not necessarily, in my view.

Ultimately these are property stocks. History tells us that good buying opportunities in property can often be found when securely-financed businesses are trading below the book value of their assets.

My research suggests a number of possible opportunities right now.

Housebuilders: where's the growth?

I think the first point to make is that most of the largest listed housebuilders are reporting an increase in completions for the current or most recent financial year. The most notable exceptions to this are those focused on London (Berkeley) or partnership/affordable housing.

This suggests to me that conditions for mid-market volume housebuilders are not too terrible, albeit profitability remains subdued due to margin compression.

Book value bargains?

As I mentioned above, when it comes to property I think the balance sheet is king.

Even prior to the recent market wobble, a number of housebuilders were trading comfortably below their tangible net asset value. Some were even trading cheaply enough to qualify for our Benjamin Graham NCAV Bargain Screen – a deep value strategy.

This weeks’ falling share prices mean that these discounts have widened further in several cases.

Here’s a summary of the situation at the time of publication. I’ve ranked companies by the size of their discount to tangible book value – i.e. with the cheapest at the top:

In investing as in life, the cheapest choice isn’t always the best buy.

Crest Nicholson’s 50% discount to tangible book value is unusual by any standards and suggests investors have a degree of concern about the company’s ability to generate satisfactory returns from its assets.

The material ongoing net debt position is not ideal and the business generated a return on equity of less than 1% last year – not a sustainable result:

In our most recent DSMR review, Graham noted a going concern warning relating to interest cover on debt and flagged up multiple recent profit downgrades:

He took an AMBER/RED view on Crest to reflect our preference for financial discipline and balance sheet strength.

Large discounts to book value at MJ Gleeson and Vistry also reflect concerns about performance, in my view, albeit to a lesser extent. See here and here, respectively, for our most recent DSMR comments on these shares.

Why buy? The appeal of these heavily discounted stocks is that if volumes and house prices do improve, these shares could be in the best position to deliver rapid price gains. The flipside of this is the additional risk of problems when compared to more highly-rated peers.

For these reasons, I would probably opt to select a basket of the cheapest stocks if I wanted to invest in the most heavily discounted housebuilders. This would provide decent upside exposure, while also giving me some protection against company-specific problems.

Pay more for quality? If I was looking for a stock with fewer challenges and more sustainable profitability – perhaps also a reliable dividend – then I would be more tempted to go fishing in the middle of this list.

My pick would probably be Bellway, thanks to a combination of its attractive valuation and stable outlook for earnings.

The other two obvious candidates – Taylor Wimpey and Barratt Redrow – have both suffered declining earnings forecasts over the last year. And while Taylor Wimpey’s 8.5% dividend yield seems tempting, it’s not covered by earnings and is reliant on the group’s declining net cash balance for support:

Scottish small cap Springfield Properties also looks potentially interesting to me and is well-regarded by the StockRanks. However, I would want to do a deeper dive into this business before taking a conviction view, given its small size and regional focus.

Quality & Momentum

In my table above, the only stocks trading at a premium to their tangible book value were London-focused brownfield specialist Berkeley Group and Persimmon.

There is a reason for this – they’re among the most profitable builders in the market at the moment. They’re the only two companies that have achieved double-digit operating margins over the last 12 months. They have also generated two of the three highest returns on equity over the last year.

As in banking, property firms that generate higher returns on equity earn higher price/book ratios.

The table below provides a summary of the profitability of each of our listed housebuilders over the last nine months:

As a general rule, I would say that a return on equity of less than 8% will make it difficult for a company to generate sustainable value for shareholders.

It’s not a surprise to see that the most heavily discounted stocks are also among the least profitable. In my experience, stock market valuations often reflect these factors more accurately than we might like to think. When considering a potential bargain, it’s worth asking whether the market might be right to be cautious.

The profitability of housebuilders was distorted for a long time by the Help To Buy scheme. Now that this has dropped out of the numbers, we’re seeing the best housebuilders generate returns of around 10% on their equity value.

In a strong housing market I’d hope to see this ceiling rise (without government aid) to perhaps 15%. We’re not there at the moment, but I think this rough estimate helps to illustrate the re-rating that could be possible for some of the more unloved housebuilders.

Of course, the potential timescale for such a recovery remains deeply uncertain. That’s why it can be useful to consider momentum too, even with a focus on value and quality.

What do the StockRanks say?

One of the most powerful features of the StockRanks is their ability to meld quality, value and momentum into a meaningful overall score. Baskets of higher-ranked stocks have consistently outperformed baskets of lower-ranked stocks over the last decade:

Here’s how my list of housebuilders is viewed by the StockRanks at the time of writing (note the Vistry StockRank is stale and almost certain to be revised when this week’s interim results have been digested by the algorithms.):

I think it’s worth noting that the two stocks trading at the largest discounts to book value – Crest Nicholson and MJ Gleeson are also among those with the lowest MomentumRank. This score reflects a combination of earnings estimates and recent price action.

The other is Barratt Redrow, where profit estimates have fallen by 20% since last summer:

In our experience, a very low MomentumRank is often a sign that patience will be required, even if the apparent value is real.

What I’d do

The best approach to playing the housebuilding sector depends on an investor’s chosen style, risk tolerance and timeframe. It may also be that this area of the market simply isn’t all that attractive at the moment, relative to other opportunities.

For me personally, there are a few options I might consider if I was looking to invest in this sector (I’m not, currently, but I have done and may do again):

• Value: a basket of the cheapest housebuilders, hoping that improved market conditions will drive a recovery in margins and resulting valuation re-rating;

• Quality: Berkeley Group, Bellway and perhaps Persimmon and Springfield look interesting to me as longer-term holds with decent StockRanks.

• Momentum: I’d focus on stocks with a MomentumRank of 80+, probably choosing two or three from among Springfield, Persimmon and Berkeley.

As always, these comments reflect my views and are not investment advice or stock tips. These choices won’t be suitable for everyone (or even anyone else). In all cases, I’d also want to do some additional research before committing to an investment.

Patience needed?

I’ll finish with this thought. On Wednesday 4 March, two of the UK’s most experienced housebuilder CEOs both announced their retirements.

David Thomas, CEO of Barratt Redrow is retiring after 11 years on the role and 17 years at the UK’s largest listed housebuilder.

Perhaps more surprisingly, Vistry’s executive chair and CEO Greg Fitzgerald announced his retirement after almost nine years in the role and 45 years in the housebuilding sector.

Fitzgerald started his career as an apprentice and is widely respected as one of the most capable managers in the UK housebuilding sector. I suspect that the news of his retirement may have contributed to Vistry’s shocking 25% share price slump on Wednesday.

Although Mark concluded that Vistry’s revised full-year guidance was probably a profit warning, it didn’t look serious enough to us to justify such a big cut to the group’s valuation.

Until this week, investors generally believed Fitzgerald was committed to completing the challenge of transforming Vistry into a capital-light, high-return partnership homes specialist. I think it’s fair to say Fitzgerald's reputation formed part of the investment case for many investors.

Of course, it’s worth pointing out that personal factors may be involved in both men' s decisions. They both also have 12-month notice periods and won’t be rushing out of the door just yet. But I can’t help wondering if either of them would have chosen to retire now if they believed the UK was on the cusp of a new housing bull market.

I wonder if a more likely explanation might be that a certain amount of patience will be needed to reap the rewards that could be on offer in the UK housebuilding sector.

Disclosure: Roland does not have positions in any of the shares mentioned.