Last week’s UK Budget was a big one. Chancellor Rachel Reeves announced several reforms that could impact many FTSE 100 stocks.
Tax changes and investment plans were front and centre. That got me thinking about potential Footsie winners and losers.
One industry-leading name in particular stood out to me after watching Chancellor Reeves’ 30 October announcement.
Housing reform
Housing is high on the agenda. The government announced it will spend £5bn on housing investment in 2025 and 2026 to increase affordable housing. Plans to hire hundreds of new planning officers to accelerate activity also caught my eye.
This had been fairly well signposted in the lead up to the 30 October Budget. For example, the Labour Party campaign pledged to build 1.5m new homes within five years of being elected.
I have had one Footsie homebuilder in my sights since that election win. I thought it was time to revisit what the UK Budget could mean for its fortunes.
FTSE 100 property developer
Barratt Redrow (LSE: BTRW) is on my radar. Having rebranded from Barratt Developments following its acquisition of rival Redrow for £2.5bn in October 2024, it is in an interesting place.
The Footsie builder is hoping to achieve significant revenue and cost synergies, as well as maintaining a robust balance sheet to help deliver improved shareholder returns moving forward.
Shares in the British group have slipped 19% in 2024 to 444.8p. That’s despite seemingly positive initiatives that would increase demand for property development services.
The company boasts a £6.5bn market cap but its share price has struggled to climb anywhere near the heights of 750p per share we saw in December 2022.
A cost of living crisis, higher build costs and rising interest rates have all contributed to that. Consumer confidence has been hit and reduced demand while margins have been squeezed.
The critical thing is whether the government can turn its public commitments into reality. If it can deliver the people, materials and regulations required, that could bode well for Barratt moving forward.
Valuation
Shareholders will be hoping for a change in fortunes.
In a recent market update, CEO David Thomas said: “We are beginning to see more stable market conditions with increased mortgage availability and affordability.“
That’s a cautiously optimistic message and one shareholders would love to believe.
A lot of these Budget issues were well signposted and are thoroughly priced into the valuation as I write on 5 November. That got me wondering if Barratt is good value at its current share price.
With a forward price-to-earnings (P/E) ratio of 16.6, Barratt looks fairly priced to me. After all, the wider Footsie trades at around 15 times earnings. Barratt’s fortunes, meanwhile, are more tied to the health and cyclicality of the British residential market.
My verdict
The latest Budget should mean good things for the share price. Homebuilding is top of the agenda for the new government and the FTSE 100 group is an industry leader.
I do think Barratt could be one I’ll buy for the long term. However, high mortgage rates, the threat of a recession and potential inflationary pressures mean I won’t be buying right now.
Further selling to drive the price down or realisation of the planned Redrow synergies would give me reasons to take another look at the UK homebuilder.
