Analysts Encourage Investors to Buy Housebuilding Shares

While the stock market has enjoyed a recovery in recent days in the wake of Britain’s decision to leave the European Union, there is still a difficult outlook for a number of sectors, including housebuilding.

The sell off after the referendum was so severe that trading in firms listed in the FTSE 100 was suspended temporarily earlier in the week as the companies’ share prices were hit by double digit falls two days in a row.

Since the referendum, housebuilders are off by 34% across the board, although one analyst believes that the fire sale has gone far enough and is imploring ‘brave’ investors to snap them up at the current discount prices.

If the UK enters a slowdown economic period, Liberium believes that in the next year house prices will fall by about 3% and when analysts look at previous periods of falling house prices, they believe that this would knock 18% per share off the earnings of housebuilders and 20% from key stock target prices.

As a result, a share price fall of 34% since last week is excessive in their opinion.

In a report, they stated that the valuations across the sector are far more compelling, in particular with dividends still intact because of land banks and strong balance sheets.

Their ‘buy’ recommendations were limited to three housebuilders in particular – Gleeson, Berkeley and Bellway, however they maintained ‘hold’ status on other major firms in the UK such as Taylor Wimpey, Redrow, Persimmon, Bovis and Barratt.

Charlie Campbell of Liberium commented that the greatest risk is long term uncertainty, adding that in recent years buyers have delayed purchases for lesser reasons than the current levels experienced.

The latest survey has found that 20% of Londoners are now less likely to sell their home following the UK’s vote to leave the European Union.


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BDC 309 : Oct 2023