Rise in home sales at Vistry Group amid declining interest rates, yet concerns persist about their emphasis on social housing
House sales ticking up at Vistry Group, driven by interest rate cuts resulting in lower mortgage costs, is a positive sign for the company. However, a word of caution has been raised by an analyst over the lack of clarity surrounding government funding for social housing, which collaborates with firms such as Vistry Group to build homes.
The concern is that as long as the government hasn’t announced a significant funding program for social and affordable housing, businesses like Vistry may find themselves in a tough spot compared to others thriving in the thriving housing market. The analyst's view is that the firm might experience a negative impact amidst other builders flourishing during this record-warm spring.
Data from Vistry revealed that weekly home sales have increased since the start of 2025, with 1.32 homes sold in the last eight weeks, up from 0.59 in the preceding months affected by subdued partner-funded transactions. This model involves private sector developers constructing homes for other organizations, often for social housing purposes. Despite partner-funded activity remaining at a relatively low level due to investment constraints, the firm noted an improvement in sales to home buyers as lenders have broadened their product ranges and slashed borrowing costs in anticipation of further base rate cuts.
Britain's central bank has reduced interest rates by 0.25 percentage points four times since August 2024 in response to decreasing inflation. The latest cut occurred last Thursday, bringing the base rate to 4.25 per cent since then, major banks have lowered their mortgage rates. Santander announced several new mortgage deals with sub-4 per cent rates, while Barclays introduced the market’s lowest five-year fixed rate deal for buyers with a 40 per cent deposit.
Looking ahead, Vistry forecasts both open market and partner-funded home volumes for 2025 to be at a "similar level" to the previous year.
The scene is set for significant developments in the housing market due to government initiatives targeting affordable housing. In late March, the Chancellor and Deputy Prime Minister unveiled an additional £2bn towards building up to 18,000 new affordable homes. The properties will begin construction by March 2027 and be finished by the end of the parliament in June 2029. Additional information about the allocation of funding is expected after next month's spending review.
The government aims to construct 1.5 million homes during the following five years, leveraging building on lower-quality "grey belt" land and implementing mandatory housing targets for councils.
Vistry's shares were 0.9 per cent lower at 627.4p on late Wednesday afternoon, reflecting a significant decline in the past year. Investors considering investing in similar companies may want to keep an eye on the government's decisions regarding funding for social and affordable housing.
- The increase in house sales at Vistry Group, aided by lower mortgage costs due to interest rate cuts, suggests a promising outlook for the company's finance and real-estate business.
- However, the lack of clarity surrounding government funding for social housing could potentially put Vistry at a disadvantage compared to other thriving businesses in the housing market, especially as they expand and invest in the sector.
- The government's recent announcement of additional funding for building up to 18,000 new affordable homes could influence the investment landscape for companies like Vistry, focusing on mortgages and real-estate business, as they navigate the changing housing market landscape.
