Citigroup is forecasting a bounce back for shares in the housebuilders' sector now that the costs of cladding repair work are starting to be known.
Shares across the sector have dropped by as much as 20% since the start of the year due to worries over the government’s demand that developers pay for repairs required following the Grenfell Tower tragedy.
Persimmon, Taylor Wimpey, Berkeley, Crest Nicholson and Redrow all confirmed this week they have signed the government’s Building Safety Pledge with more announcements likely, said the broker.
The Pledge covers buildings over 11m high dating back thirty years.
Citi says funding for orphan buildings still has to be agreed and that might delay a full sector re-rating, but investors should get some comfort that the bulk of the costs will now be reflected in estimates.
“In addition, with housebuilders now on an equal footing (after providing for individual legacy exposure), we see scope for relative re-rating on growth prospects”.
Bellway, Taylor Wimpey and Barratt are the best bets for a relative re-rating on a year’s view adds Citi.
Shares in Berkeley were up 0.6% at 3,889p, Taylor Wimpey down 1.7% at 131.7p and Persimmon up 0.3% at 2,218p.