The UK housebuilding sector is likely to prove relatively resilient than the market currently thinks, analysts at Citi believe.
More Bank of England rate cuts could be around the corner than is being priced into the sector's share prices,
Valuations and expectations for builders, such as Barratt Redrow PLC (LSE:BTRW), Taylor Wimpey PLC (LSE:TW.), Persimmon PLC (LSE:PSN), Berkeley Group Holdings PLC (LSE:BKG), Vistry Group PLC (LSE:VTY) and Bellway PLC (LSE:BWY), remain "relatively undemanding", the bank said.
This is based on a "sluggish recovery path" being expected due to a delayed rate-cutting cycle.
But due to heightened global uncertainty, including recession concerns sparked by US tariffs, rate cuts might not be so thin on the ground, with interest rate predictions falling in recent days.
Citi said: "We think the likelihood of a monetary policy response to a modest economic slowdown raises prospects of lower rates."
The US bank also pointed to strong structural support from "significant pent-up domestic demand", supply shortages and potential regulatory easing around planning and mortgage lending.
Citi said lower interest rates and deflationary pressures from shifting global supply chains could benefit the sector over time. It revisited interest rate-based scenarios in the note and said the sector may see a multi-year cyclical recovery.