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The UK stock market’s surged to a fresh all-time high — and for once, it’s not tech driving the rally. The FTSE 100, long considered sluggish compared to the S&P 500 or Nasdaq, is finally showing signs of life. A combination of stabilising interest rates, renewed optimism around US-China trade talks and a strong rebound in certain sectors has lit a fire under UK shares.
Interestingly, it’s the housebuilders — often the first to fall during downturns — that are now leading the charge.
After a brutal 2024, where high interest rates and falling buyer demand hit profits across the sector, sentiment’s started to shift. With rate cuts on the horizon amid growing government support for housing, investors seem freshly enthused with the sector.
Here are two housing stocks I recently purchased, both of which still have significant potential and are worth considering for growth and income.
Rising from the depths
Vistry‘s (LSE: VTY) a mid-cap housebuilder with a £1.94bn market-cap and a focus on mixed-tenure developments. The firm had a rough 2024, with its share price collapsing by 57% in Q4 after posting a sharp earnings drop — even while revenues rose. This disconnect spooked investors but may now be creating an opportunity.
In the past few days alone, the share price has bounced back 12%, suggesting bargain hunters are circling.
From a valuation standpoint, the stock looks attractively priced. Its price-to-sales (P/S) ratio is just 0.52, and its price-to-book (P/B) ratio sits at a low 0.61 – both well below the sector average. For investors who believe in the UK housing market’s long-term prospects, that could be a compelling entry point.
Of course, there are some risks that shouldn’t be overlooked. The drop in earnings is pressuring margins, meaning any delay to interest rate cuts could put untenable strain on affordability and demand. Vistry also leans more heavily toward affordable and partnership housing, which depend on favourable government policies.
Still, if the recovery in housebuilding gathers steam, it should be in a good position to benefit.
The income-focused option
Taylor Wimpey‘s (LSE: TW.) a giant in the sector, with a £4.12bn market-cap and nationwide footprint. Like other housing stocks, it suffered in Q4 2024, with the share price falling around 27%. This was prompted by declining earnings and revenue. But now the tide seems to be turning. The stock’s risen 7.3% in just a few days, as investors reconsider its long-term appeal.
What stands out here is the dividend. Despite a minor reduction last year, it still offers a 7.8% yield, making it attractive for income-focused investors. That income looks reasonably safe too, supported by a solid balance sheet and ongoing cost discipline.
It also faces risks from weakness in housing demand, which could force further cuts to the dividend if profitability doesn’t improve. Being its main value proposition, that could seriously hurt the share price. For now, it looks fairly valued, with a P/E ratio of 18.8 and P/B ratio of 0.93 – so growth potential’s limited.
However, the combination of scale, brand recognition and income potential makes it a strong candidate for a long-term dividend portfolio.
