Chancellor George Osborne will give a boost to private housebuilding companies, to be announced in his Autumn Statement on 25 November. The government is set to fund the building of 400,000 houses to push down property prices.
The spending boost is in stark contrast with an expected £20bn ($30bn) of proposed cuts in public services as the government is trying to narrow the deficit. The government is set to admit that there is a problem with housing in the UK. According to Osborne's speech, released ahead of the statement, he will underline the importance of dealing with the property crisis.
"In the end, spending reviews like this come down to choices about what your priorities are," he will say. "And I am clear: in this spending review, we choose housing. Above all, we choose homes that people can buy."
The chancellor will announce some £2.3bn worth of government spending to support private developers. At least half of the 400,000 new houses will be offered at a discount to those entering the property market.
The boost, which will help first-time buyers in a time when 89% of Britons think it is increasingly difficult to enter the housing ladder. The plans have also pushed up housebuilders on the FTSE 100.
Four out of the five biggest risers on the stock exchange blue chip were private developers this morning, lifting up the FTSE, which rose by almost 1%. Persimmon, Taylor Wimpey, Berkeley and Barratt were the house builders profiting from the announcement.
Investors were keen on the housebuilders, which jumped an average of around 4% after the opening bell as the government is set to admit that there is a problem with housing in the UK. According to Osborne's speech, released ahead of the statement, he will underline the importance of dealing with the property crisis.
"Affordable housing is a big issue in the UK today and the government looks to be responding by turning on the supply taps," Laith Khalaf, senior analyst at Hargreaves Lansdown commented. "First time buyers are likely to benefit from the plans, but so are the developers who are going to going to build the hundreds of thousands of starter homes ordered by George Osborne."