Persimmon’s exposure to first-time buyers and the north gives it advantage over housebuilder peers

Persimmon and Taylor Wimpey both make it onto Goldman Sachs’ Best and Brightest UK Ideas list, amid expectations they will return lots of money to shareholders over the next year

Persimmon - Persimmon’s exposure to first-time buyers and the north gives it advantage over housebuilder peers
The property market may be slowing, but money can still be made out of the housebuilders, says Goldman

Persimmon PLC (LON:PSN) is the “best positioned” of the UK housebuilders to cope with a slowing property market, claims Goldman Sachs, which has included the developer in its Best and Brightest UK Ideas list.

The UK property market has come under the cosh over the past couple of years amid political and economic uncertainty, with London being the hardest hit after a period of rapid inflation.

READ: Housebuilders' pay big yields but do they offer value any more?

But analysts at the blue-chip investment bank believe the FTSE 100 group’s exposure to the first-time buyer market and to regions outside of London – both of which have seen demand remain strong – stand it in good stead going forward.

The number crunchers added that, at £217,000, Persimmon’s average selling price is the lowest in the sector, meaning affordability is less of an issue than with higher-valued homes.

Shareholders set for big return

“Our analysis of the product positioning and relative strengths and weaknesses of the UK home builders leads us to believe that Persimmon will have a competitive advantage vs. peers in a slowing housing market,” said Goldman in a note to clients late on Monday evening.

“It maintains the lowest ASP in the sector, meaning that affordability is less of a constraint. Moreover, it is most exposed to first-time buyers, a demographic where we forecast continued robust demand, and less affected by the recent fall in transactions in the secondary market.”

Importantly, all these factors “give credibility” to future dividends, and Goldman estimates a forecast total shareholder return of 36.5% over the next 12 months.

Taylor Wimpey also makes the cut

That puts Persimmon at the top of the class, but another housebuilder, Taylor Wimpey PLC (LON:TW.), isn’t far behind and also makes it onto Goldman’s list.

“Taylor Wimpey has a best-in-class strategic land operation that is enabling it to reduce its short-term land holdings,” read a note to clients.

“The resulting reduction in required land spend means that we forecast Taylor Wimpey will have excess cash that it can return to shareholders. We forecast a total shareholder return over the next 12 months of 27.2%, the second highest in our UK Homebuilders coverage.”

Quick facts: Persimmon

Price: 2514 GBX

Market: LSE
Market Cap: £8.01 billion

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