Britain’s housebuilders can take an expected corporation tax hike to be levied on the sector in tomorrow’s Budget in their stride, according to broker Jefferies.
The Residential Developer Tax will be an additional 5% on top of standard corporation tax from April 2023, suggests the broker.
Build to rent is likely to be exempt alongside social housing partnerships, it added.
RDT will mean corporation tax for the builders rising to 30% by 2023, but even with that increase, the sector looks cheap says the US broker.
With volume growth and improving margins, the sector is still forecast to achieve average mid-single-digit annual earning growth between 2022-25.
“The step-up in tax has mildly tamed our expectations of dividends based on EPS coverage.
"However those returns set at absolute levels we see as sustainable (Persimmon PLC, Berkeley PLC), with special dividends capable of driving an above 8% yield for Barratt by late 2022 and for Taylor Wimpey and Vistry in 2023."