New Build Outlook

As with all stories, the UK economy tends to be thrown curve balls every 5-15 years which allow for what we call the property cycle. House prices rise and rise until it's unmanageable and then fall off a cliff for the market to catch up and then start again.

From a personal point of view, we have faith in the UK’s housing market, it is expected that mortgage rates will slow their climb and cancellation rates will cool.

A rise in mergers and acquisitions (M&A) within the sector may also be on the horizon; according to research at Brokerage Jefferies. In a note released this week, researchers said they were “too aggressive” with downgrading the pre-tax profit forecasts of some of the biggest house builders in the country by an average of 70% in October.

“The combination of mortgages rates beginning to abate and a normalisation of cancellation rates, we believe could bring improving confidence of underlying demand for UK residential new build in 1Q23 but given the lumpy nature of contracts it may take longer to see in other asset classes,” they wrote.

This puts residential developers like Berkeley, Taylor Wimpey, Bellway and Vistry in a good position. The broker has hiked the target share price of all five of the FTSE developers today.