Goldman Sachs has kicked off coverage of the UK’s listed homebuilders with a broadly upbeat view, arguing that the sector is on the cusp of a cleaner operating environment and that current valuations still look washed out.
The bank highlights a mix of improving affordability, firmer housing indicators and scope for margin repair as rate cuts come through, though it also draws a sharp line between the North and the South when it comes to where the growth is likely to land.
The starting point is the macro backdrop. Mortgage rates are already drifting lower and Goldman’s economists expect the Bank of England to cut base rates to about 3% by next year.
That feeds directly into the charts on pages 3 to 5 of the note, which show private housing starts up 30% year to date, house prices stabilising and mortgage costs easing steadily as a share of income.
First-time buyer affordability is still stretched in London, where mortgage payments swallow more than half of take-home pay, but conditions look considerably better in the North and Scotland.
Against that backdrop, the analysts see earnings momentum returning. They forecast earnings growth across the sector at 8%, 10% and 19% over 2025, 2026 and 2027, helped by slightly firmer selling prices, modest volume growth and margin benefits as build-cost inflation normalises. Ye
t valuations remain pinned near the bottom of their 10-year ranges. The sector trades on price/earnings multiples roughly in line with history but on price-to-book ratios at multi-year lows, as shown in the valuation charts on page 3.
Goldman’s preferences lean towards scale and exposure to regions where affordability is strongest. Barratt Redrow PLC (LSE:BTRW) comes out on top with a buy rating and a 449p target price, helped by its size, brand breadth and the outlet growth unlocked by its acquisition of Redrow.
The analysts expect it to deliver average annual volume growth of 7% through to 2030, with the EPS growth profile the strongest in the sector.
Persimmon PLC (LSE:PSN) also earns a buy. Its average selling prices are about 11% below peers, a function of its focus on more affordable homes and Northern regions.
The note’s regional analysis on page 5 shows Northern house prices running ahead of those in London and the South East, a trend Goldman expects to continue. That gives Persimmon a tailwind on both sales rates and volumes, and the analysts see the company achieving operating margins back towards 17% by 2029.
Vistry Group PLC (LSE:VTY) is the other buy. As the largest provider of affordable housing, it is set to benefit from government plans to ramp up social and affordable delivery. The chart on page 9 shows Vistry’s market share running five times larger than the next pure-play competitor. With more public funding flowing into the sector and a cleaner post-restructuring base, Goldman thinks Vistry can push revenue growth to the high end of its 5% to 8% medium-term target.
Taylor Wimpey PLC (LSE:TW.) and Bellway PLC (LSE:BWY) both land at neutral. Taylor Wimpey’s outlet numbers have dropped from their 2022 peak and Goldman thinks its 14,000-home volume ambition may be a stretch. Bellway’s slower sales rates and weaker returns hold it back. Both trade on middling valuations that the analysts see as fair for now.
Berkeley Group Holdings PLC (LSE:BKG) is the outlier with a sell rating and a 3,714p target price. Exposure to London weighs heavily: the note’s regional exhibits show the capital struggling for price momentum, while a thicket of regulation, patchy overseas demand and affordability issues slow the pace of new development. Goldman does not expect profit growth from Berkeley until at least FY27, and even then only modestly.
The overarching message is that the sector may not be booming, but it is healing. Falling mortgage rates and an improving planning backdrop offer a clearer path for volumes and margins to recover. The shares that already lean into affordable regions and have the scale to flex with demand, chiefly Barratt Redrow, Persimmon and Vistry, look the best placed to benefit.