Stifel says Your First Home scheme could boost builder earnings

Investing.com -- Stifel said the UK government's new Your First Home scheme will benefit housebuilders and building materials companies, with full details expected at the October 28 budget.

The government announced it will offer loans of up to 20% of property value to first-time buyers who can pay a minimum 2.5% deposit. The loans will be interest-free for a period, similar to the Help-to-Buy program that ended in 2023. The scheme will launch at the end of 2026.

The program will include property value caps set by region, along with income and deposit limits. Housebuilders will contribute to the scheme based on property value.

Stifel estimates the most exposed building materials companies could see earnings increase by 35%. Housebuilders could see operating profit rise by around 20% on average.

The firm said the stock market correctly identified MJ Gleeson and Persimmon as the biggest winners among housebuilders due to their high first-time buyer exposure at below-average price points. Stifel rates both companies as Buy.

The firm said the market may be underestimating the exposure of Crest Nicholson and Taylor Wimpey, while overestimating that of Barratt Redrow.

Among building materials companies, Stifel highlighted Genuit as a Buy rating with significant exposure to UK new build residential.

Stifel noted some first-time buyers may delay purchases to wait for scheme details, which could slow sales rates for housebuilders over the next two to three months.

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