UK housebuilders have seen a significant decline in share prices, down about 20% since the October Budget, and analysts at RBC Capital Markets believe the sector has been oversold and presents opportunities, with many stocks now trading below tangible net book value.
Shares in housebuilders were mostly trading lower on Monday amid reignited worries about cladgging taxes.
The analysts noted that valuations even at levels at the end of last week imply shares are cheaper than the land holdings of housebuilders, which it attributed to market fears rather than fundamental issues.
Land scarcity, not falling land values, remains the key challenge for the sector, the RBC team reckon.
Barratt Redrow PLC (LSE:BTRW) was upgraded to 'outperform' from 'sector perform', citing an attractive discount to book value.
Crest Nicholson PLC (LSE:CRST) was upgraded to 'sector perform', with analysts seeing signs of stabilization following legacy challenges.
'Outperform' ratings were maintained for Bellway PLC (LSE:BWY) and Taylor Wimpey PLC (LSE:TW.).
Conversely, Persimmon PLC (LSE:PSN) and Vistry Group PLC (LSE:VTY) were downgraded to 'underperform' due to risks tied to cost pressures and valuation concerns, with Berkeley Group Holdings PLC (LSE:BKG) also reiterated on the same negative rating.
MJ Gleeson (LSE:GLE) was also downgraded to 'sector perform' as its relative valuation became less compelling.
RBC said that while fears remain over potential market challenges, the current data suggests a less severe outlook than some anticipate.