Persimmon PLC (LSE:PSN) shares rose 4% on Monday after JP Morgan named the housebuilder as its preferred stock in the sector while downgrading Taylor Wimpey PLC (LSE:TW.) and Vistry Group PLC (LSE:VTY) to 'underweight', as rising mortgage rates and build cost inflation force the bank to cut its 2027 earnings forecasts by an average of 20%.
Vistry dropped 3% in early trading following the note from analyst Zaim Beekawa.
The bank favours Persimmon on the grounds that its lower average selling price, geographic spread and vertical integration offer better insulation against cost pressures than peers.
JPM now expects around 100 basis points of margin compression across the sector in 2027, a sharp reversal from its previous forecast of approximately 40 basis points of expansion.
For Taylor Wimpey, the bank's 2027 estimates sit 15% below Street consensus, with JP Morgan warning that pricing in the South of England continues to deteriorate and that consensus margin assumptions look too optimistic.
The bank also questions whether Taylor Wimpey's dividend policy is sustainable given a continued decline in earnings.
Vistry faces the sharpest revision, with JP Morgan's 2027 forecasts sitting 33% below consensus.
The bank argues that the market is underestimating the scale of incentives Vistry is offering customers as it tries to boost cash generation by running down inventory.
Vistry's partnership model, where revenues and contracts are agreed in advance, leaves the group more exposed to build cost inflation because costs rise after prices are locked in.
JPM also flags political risk specific to Vistry, noting that Andy Burnham, the Greater Manchester mayor, has previously called for rent freezes and placed emphasis on social housing, which could dampen appetite from private rented sector investors.
The private rented sector is a key sales channel for Vistry's partnership business, meaning any softening in institutional demand would hit the group disproportionately hard.
