The American bank argues that UK housebuilders are among the best placed to weather a recession, thanks to political tailwinds and the prospect of falling interest rates.
Even in the midst of a housing market slump, JP Morgan says investors should not write off Britain’s biggest housebuilders.
“The UK housebuilders should benefit from supply-side initiatives enacted by one of the most pro-housebuilding modern governments,” according to the bank’s latest note on the sector.
Elodie Rall and Zaim Beekawa, who authored the report, add that “potential further support from interest-rate cuts” could give the industry another leg up.
It’s a punchy call in a market many feel has already hit the buffers.
Residential construction is already in recession across Europe, and the UK has not been immune.
But the Wall Street bank argues that, unlike the 2008 financial crisis, volumes have not collapsed from a peak. Builders are coming into this downturn from a lower base, which may soften the blow.
Its top picks are Barratt Redrow PLC (LSE:BTRW), Persimmon PLC (LSE:PSN) and Bellway PLC (LSE:BWY) - all rated “overweight” by the bank’s analysts.
The case for optimism, they suggest, lies not in demand but in supply. Recent government measures, from planning reforms to Help to Buy-style support, mean the state remains firmly on the side of the developers.
JPM's analysts note that this is “one of the most pro-housebuilding modern governments”, highlighting how rare it is for housing policy to shift so firmly in favour of construction.
Rate cuts could also play a key role. With inflation easing, the Bank of England is expected to loosen monetary policy later this year.
That would help mortgage affordability and take pressure off stretched buyers and by extension, support the companies that build for them.
JP Morgan’s wider assessment spans building materials and infrastructure stocks too, but for UK investors, the housebuilding sector stands out. It may still be bruised from the market correction of 2022–23, but analysts suggest it could be one of the few bright spots in a cloudy economic outlook.
The tone is cautious but constructive. “We are already in a recessionary environment in key end-markets,” the report notes, but the UK’s policy backdrop and potential rate cuts could offer a surprising degree of resilience.