Housebuilding bull Peel Hunt says the recent sell-off has gone way too far and the sector is 25% below where it should be.
“The UK housebuilders have been battered since the start of the New Year, with worries about inflation/higher interest rates and increased costs associated with resolving the cladding issue.
“However, recent trading has been strong while the medium-term industry fundamentals (stock shortage, affordability, strong demand, forward sales and balance sheet strength) all point to a continuation of robust profitability across the sector. “
The broker adds that the sustained share price weakness has left the sector trading at extremely cheap multiples that imply the market is expecting to see either significant earnings downgrades or extremely onerous provisions relating to cladding and wider fire safety issues.
Best value currently is in Redrow PLC (LSE:RDW), Vistry PLC and BellwayPLC says the broker.