Shareholders in Vistry Group (LSE:VTY), the FTSE 250 housebuilder with a focus on affordable homes, are likely to be paying close attention to who the country’s next Prime Minister might be. Why?
Because the favourite to land the top job, Andy Burnham, wants to see “the biggest generation of council house building since the second world war”. Could this help reverse the decline in Vistry’s share price? Let’s see.
A massive problem
Successive governments (of all colours) have failed to deliver enough homes. According to the Centre for Policy Studies, the country needs another 6.5m of them. Indeed, Savills claims the current government’s likely to fall 40% short of its target to build 1.5m homes during the course of this parliament. So why should PM Burnham be any different?
Well, in Manchester last year, housing completions were at a 15-year high. He’s also an advocate of social properties that are cheaper to rent and run. Burnham sees this as the answer to the cost-of-living crisis. In September 2025, he said the government should borrow another £40bn for housebuilding. Clearly, Burnham’s a big believer in social and affordable housing.
So?
And I think Vistry Group could be a big winner from this. In 2025, it reported 15,658 completions. Of these, 74% were built in conjunction with its local authority, housing association, and private rented sector partners.
A larger proportion of social properties means the group should achieve a higher return on capital employed (ROCE) than its rivals, who focus more on private housing.
Vistry’s partnership model helps avoid the need to have lots of cash tied-up in land. And the receipt of stage payments means its working capital requirements are lower. Indeed, in 2025, it reported a ROCE of 13.9% compared to, for example, Persimmon’s 11.7%.
However, I think it should be doing better than this. In fact, it’s ROCE’s been going in the wrong direction since the pandemic:
- 2025 – 14%
- 2024 – 15%
- 2023 – 21%
- 2022 – 25%
- 2021 – 26%
Like all in the housing sector, it’s been affected by falling disposable incomes and construction cost inflation.
Also, the group’s gained an unfortunate reputation for getting its sums wrong. In late 2024, it reported that it had underestimated the final build costs for a small number of its developments. Since then, its share price has crashed 80%.
A brighter future?
However, as disappointing as the trend in its ROCE might be, I think Vistry has great potential, if it can get its act together and rebuild investor confidence. But it might take a while.
The group says activity is “subdued” as the industry transitions from the current Social Affordable Housing Programme (SAHP) to the next one that runs until 2036. However, it says the new £39bn programme should “drive a step up in demand” from the end of 2026 onwards.
Over the medium term, the company reckons it can build 20,000 home a year and is targetting a ROCE of 40%.
Who knows, with a new occupant in Number 10, there could be a return to a 1960s-style era of housebuilding. But irrespective of what a new Prime Minister might announce, the chronic housing shortage remains an issue that the existing SAHP is seeking to address.
On this basis, I believe Vistry remains a long-term stock to consider.
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James Beard owns shares in Persimmon plc.
