UK homebuilders slump as budget's first-time buyer scheme disappoints (updated)

Taylor Wimpey

Wed 16:58

Adds details on scheme, analysts comments throughout, updates shares, adds graphic
By Simone Lobo and Raechel Thankam Job
Oct 28 (Reuters) - Shares in British homebuilders slumped on Wednesday after finance minister John Healey's much-awaited scheme for first-time homebuyers disappointed investors with limited funding, a later-than-expected rollout and higher fees than developers anticipated.
Healey confirmed the "Your First Home" scheme would be introduced next spring, funded with £4.7 billion ($6.24 billion) of government-backed lending.
But analysts said the launch was later than hoped, with the first equity loans not expected to be issued until April 2027, likely missing the start of the crucial spring selling season.
Developers will have to pay progressive fees from 1% to 4%, based on the number of homes they sell through the programme annually.
The 4% fee on sales above 250 homes was higher than the nominal fee of around 1% the market expected, Peel Hunt analyst Sam Cullen said.
The homebuilders sector index .FTNMX402020 fell more than 6% after the minister's budget speech, reversing a rally of about 9% since the government announced the scheme in September.
Barratt Redrow BTRW.L, Taylor Wimpey TW.L and Persimmon PSN.L were all down 7%, among the biggest losers on Europe's STOXX 600 index .STOXX.
FUNDING FALLS SHORT
"The biggest issue is more around the level of funding and the consequent duration of the scheme," said Investec analyst Aynsley Lammin.
The funding suggested the scheme would only last a couple of years rather than five or more, Lammin noted, potentially deterring builders from committing to new sites.
A figure close to £2 billion per year would be required to spur an increase in sales volumes, said Oli Creasey, head of property research at Quilter Cheviot. "The actual announcement has fallen some way short of that." 
The plan succeeds the "Help to Buy" scheme that ended in March 2023, but imposes income caps on applicants and requires developers to contribute to the subsidy.
That meant the boost to builders’ profitability would be smaller than previously expected, Cullen said.

 ($1 = 0.75 pounds) 

 (Reporting by Simone Lobo and Raechel Thankam Job in Bengaluru)
 ((Simone.Lobo@thomsonreuters.com, +919920570373))