Housebuilders continued to rally as the City digested the changes to planning laws announced by the government earlier in the week.
Key to the changes are the removal of the nutrient neutrality requirement for new housing developments which is likely to ease planning bottlenecks for over 100,000 homes between now and 2030, said Citi.
Nutrient neutrality regulation is a result of an EU directive on habitats which requires new build developments not to lead to a net increase in phosphate or nitrate levels.
Only 14% of England’s rivers are classed as having 'good' ecological status, and would be increasingly polluted by additional sewage from nearby newly built homes.
The Home Builders Federation (HBF) estimates that nutrient neutrality regulation has cut the housing supply by around 41,000 units this year and calculates that roughly 145,000 plots are held up in the planning system as a result of this regulation.
Barclays said although the benefit to near-term earnings is likely to be modest, this could contribute to both slightly higher volumes and slightly better land market returns in the medium term.
Citi added: “We believe these proposed planning reforms should ease some of the supply side bottlenecks for the sector and will support better outlet growth into 2024-25 as some of the affordability challenges improve.”
UBS, however, still sees the slow planning system as hindering new openings.
“However, the possibility of nutrient neutrality regulation being scrapped could free up 145,000 plots in the planning systems, which will likely mean UK housebuilders are able to open a higher number of outlets and could take pressure off land prices".
Shares in Persimmon were up 0.75% today at 1,070p having risen 9% since the changes while Taylor Wimpey was up slightly at 115.3p and Barratt was flat at 454p.