Berenberg’s latest construction note strikes a cautiously upbeat tone on UK housebuilders.
The sector may still be battling affordability pressures and a mixed reporting season, but the analysts point out that housing starts are climbing again in 2025, the first time since 2021 that volumes have turned positive.
They argue this underpins the case for a “slow and steady recovery”, even if sentiment towards the listed builders remains dour and valuations sit at the lower end of historical ranges.
Against that backdrop, the team plumps for Taylor Wimpey PLC (LSE:TW.) as its preferred UK housebuilder, citing its strong balance sheet, hefty landbank and a valuation that looks cheap relative to long-run averages.
Alongside the broader sector view, the note flags a handful of price target changes.
Balfour Beatty plc (LSE:BBY) gets a lift, with the target price raised to 710p from 660p, reflecting continued strength in the contractor space. Kier Group PLC (LSE:KIE) also edges higher, moving to 225p from 210p.
On the flipside, Ibstock PLC (LSE:IBST) sees its target trimmed to 170p from 200p, while Volution, despite being named a top pick, only gets a modest bump — to 720p from 700p.
The analysts’ conviction ideas are spread across the subsectors.
In UK contractors, Galliford Try Holdings PLC (LSE:GFRD) leads the pack: its focus on risk management and a strong balance sheet are credited with rebuilding investor trust, and margin expansion is expected to do the heavy lifting on earnings.
In building products, the top names are Hill & Smith, Howden Joinery, Mortgage Advice Bureau and Volution.
The US-exposed Hill & Smith is praised for its growth opportunities, while Howden’s “fortress” balance sheet and pricing discipline put it in good stead for a recovery in kitchen demand.
Mortgage Advice Bureau is billed as the best way to play a rebound in housing transactions, and Volution is backed for its regulatory tailwinds and acquisitive streak.
Taken together, Berenberg’s stance is that while the sector’s outlook remains patchy, the trough has passed.
The rally may not be swift, but the slow grind higher in activity should start to show through in earnings, and for investors willing to look through the gloom, there are selective bargains on offer.