RBC has reshuffled its ratings for UK housebuilders, reflecting a housing market split between solid overall demand and challenges in new home building.
While mortgage approvals and transactions are bouncing back to pre-pandemic levels, and house prices remain steady, the new build sector is still grappling with delays in planning approvals and social housing funding, holding back supply.
RBC upgraded Berkeley Group Holdings PLC (LSE:BKG) from 'underperform' to 'outperform', citing its resilience amid planning delays, and moved Persimmon PLC (LSE:PSN) to 'sector perform' from 'underperform' on the back of success opening new sites.
Meanwhile, Bellway PLC (LSE:BWY) and Taylor Wimpey PLC (LSE:TW.) were downgraded to 'sector perform' as data suggests their volume growth may slow due to fewer upcoming sites.
The bank notes that while the market shows health overall, builders face a bottleneck.
Until local authorities speed up implementing planning reforms and funds flow more freely into affordable housing, volume growth and margin recovery for many builders could be delayed.
Investors appear cautious, with valuations pricing in these risks.