Analysts at Liberum Capital have said they expect to see 28% upside in housebuilding shares on their central case that UK house prices fall by around 5% in 2023.
In a sector review, the Liberum analysts said: "We are at the optimistic end of analysts’ forecasts as we don’t expect homeowners or developers to be forced sellers, the market remains undersupplied and employment is expected to hold up well."
"We see significant upside as the market is discounting a house price fall of around 13%," they added.
The analysts noted that six updates due from housebuilders in the coming fortnight may be too early to confirm the return of a more normal housing market, but they said they are encouraged that mortgage rates are falling, pricing is firm and volumes are stable, albeit sluggish.
The Liberum analysts said their top sector picks are Barratt Developments PLC (LSE:BDEV), Bellway PLC (LSE:BWY), Berkeley Group Holdings PLC (LSE:BKG), and MJ Gleeson PLC (LSE:GLE).