Broker sees upside from rental demand, policy tailwinds and capital returns
JP Morgan has upgraded Berkeley Group Holdings PLC (LSE:BKG) to 'overweight', citing signs of recovery in London’s housing market and a favourable setup in the rental sector that plays to the group’s strengths.
Analyst Zaim Beekawa said the combination of potential policy support, easing affordability pressures and a structural supply-demand imbalance in the capital’s rental market offered a turning point for the high-end housebuilder, which has been disproportionately affected by London’s housing downturn in recent years.
Berkeley’s unique exposure to the Build to Rent (BTR) sector gives it an advantage among listed peers, the note argued.
JPM’s analysis, published in a broader sector piece UK Housing: Rental 101, identified a significant mismatch between supply and demand in the capital, with rents likely to remain elevated.
Capital returns were also highlighted as a key support for the investment case. The group has committed to return £1.7 billion to shareholders by 2034, representing around 44% of its market value.
Including a further £1.3 billion of flexible capital that could also be returned, that figure could rise to nearly 78%, excluding any uplift from potential BTR asset disposals.
Valuation was described as “undemanding”, with the shares trading at a 40% discount to historical price-to-tangible net asset value. That compares with a 31% discount for the wider sector.
JPM raised its price target for the shares to 5,000p by December 2027, applying a higher 1.2x P/TNAV multiple to reflect improved visibility in Berkeley’s core markets and the long-term value of its Berkeley 2035 strategy.
In late morning trading, shares were up 3% at 4,288p.