Liberum sees room for optimism in the housebuilding sector highlighting Bellway (Buy, target price 2860p), Vistry (Buy, TP 950p) and MJ Gleeson (LSE:GLE) (Buy, TP 560p) as it favoured picks.
The broker explained consensus estimates for most housebuilders, apart from Persimmon, appear to be bottoming out as sales rates steadily improve and pricing holds firm.
While it is too early to call the turn definitively, Liberum reckons the “price action” from the shares is very revealing pointing out housebuilders’ shares have shrugged off the turmoil in the banking system.
While understandable as two thirds of UK lending is carried out by ring-fenced banks, it signals improving sentiment in Liberum’s opinion.
The broker said house prices appear stable, with perhaps some small erosion to come as incentives continue to creep upwards while volumes are supported by improving sales rates, although constrained by site openings.
Building cost inflation is easing as some sub-contract labour rate reductions are reported, and material cost inflation declines.
Liberum noted the other recent development in the sector is the news on cladding where all the major developers have signed the government’s Fire Safety Self-Remediation. This should draw a line under this saga, and it was encouraging that companies left provisions unchanged, the broker added.