Persimmon shares fall more than 5% as investors disappointed by housing scheme funding
Key Facts
Persimmon shares fell more than 5% on October 28, and UK homebuilders’ shares declined after the budget statement disappointed investor expectations for the “Your First Home” scheme. The sector index fell more than 4% after the statement, reversing gains of 2% in the preceding period. The scheme aims to support about 70,000 first-time buyers with equity loans to purchase new homes, with sales due to begin in April 2027. But details of the funding, developer fees and implementation timetable raised questions about how much support would reach the market and how much homebuilders would benefit. Reuters reported that shares in Persimmon, Barratt Redrow and Taylor Wimpey each fell more than 5%.
The government allocated 4.7 billion pounds to the scheme, and the Treasury said its funding would come from reprioritising departments’ financial transactions. The plan offers a government equity loan of up to 20% of a property’s value, with a minimum deposit of 2.5%. The government sets a household income cap of 110,000 pounds outside London and 140,000 pounds in London. These conditions determine buyers’ eligibility and the size of the loan they can receive. The funding takes the form of a limited annual allocation, making its scale and continuity central to investors’ assessment of the scheme’s impact on new-home sales.
The scheme’s rules impose tiered fees on developers according to the number of homes each sells annually under the plan. Fees are 1% of the sale price for the first 100 homes, rising to 3% for homes from 101 to 250, then to 4% for more than 250 homes. One analyst said the highest tier exceeded the market expectation of about 1%. The fees raise the cost of participation as a developer’s sales through the scheme increase, limiting the value companies could gain from higher government-supported demand. Investors had been awaiting details of the funding and fees before estimating the initiative’s financial impact on companies such as Persimmon.
The market reaction also reflects the scheme’s expected duration and developers’ ability to plan new projects. An analyst at Investec said the funding level suggested the scheme could run “for only a few years rather than five years or more”. He added that this could deter homebuilders from committing to new sites, as such decisions require clarity on the continuity of supported demand. In his view, limited funding means companies may not be able to base their plans on a long-term stream of eligible buyers. Investors therefore did not treat the scheme as confirmed support extending over several years, despite its aim of reaching tens of thousands of buyers.
The decline also followed a strong rally in sector shares when the loan plan was announced in September. On September 28, shares in Persimmon, Barratt Redrow, Taylor Wimpey, Vistry and Berkeley rose by between 6% and 23%, while the UK housebuilder index gained 16%. Those gains reflected investor expectations that the scheme would boost demand for new homes. The October 28 decline came after details of the funding, fees and implementation dates emerged, prompting investors to reassess the scheme’s commercial impact. The comparison shows that initial market enthusiasm faded as the constraints that would determine the pace of uptake became clear.
The scheme revives government equity loans following the end of the “Help to Buy” programme in 2023. The previous programme helped buyers purchase 387,195 properties between 1 April 2013 and 31 May 2023, including 328,346 by first-time buyers. The new initiative offers similar support through an equity loan to buy a new home, but has different targets, funding terms and fees. “Your First Home” aims to support about 70,000 buyers, while the government has tied the start of sales to a timetable running through April 2027. The previous programme’s record provides context for the use of this type of support, but does not by itself determine buyer take-up for the new initiative.
The Ministry of Housing, Communities and Local Government set a deadline of before the end of December 2026 for opening buyer pre-registration and issuing guidance. Customer applications are scheduled to open in February 2027, with the first property sales under the scheme due in April 2027. This timetable means support will not reach the sales stage before then, following a period for preparation and applications. Investors had hoped for an earlier launch, while the announced date came later than the timing they had hoped to benefit from. The announced dates will be the next milestone that homebuilders and investors watch as they assess when the scheme’s impact on sales may emerge.