UBS still sees "room to run" in UK housebuilding sector

2nd Jul 2015 10:54

In spite of a strong performance from UK housebuilding stocks year-to-date and over the past five years, UBS has retained a bullish stance on sector, saying there's "still room to run".The bank has hiked target prices for most stocks across the sector by around 20-25% on average.It reiterated its 'buy' recommendation on Barratt Development, Bellway, Bovis Homes, Berkeley, Redrow and Taylor Wimpey, but kept Persimmon at 'neutral' on valuation grounds.UBS sees more upside in small growth oriented players such as Bellway, Bovis and Redrow, but said the whole sector in general still offers attractive dividend yields.The bank said housing affordability was attractive, with mortgage rates declining and wages strategic to a pick up. "While the debate on rising base rates will undoubtedly return, we expect a gradual rate cycle that can be absorbed in part by banks and increased wages," it said.Meanwhile, there is limited competition for land, driven by planning reform and limited funding for SME builders. Government policy support should also drive upside in the housebuilding sector, driving predominantly by the 'Help to Buy' scheme.