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Investing.com -- Goldman Sachs has initiated coverage of U.K. homebuilders with a constructive view on the sector, arguing that easing mortgage rates, improving affordability and early signs of a demand pickup are setting the stage for an earnings recovery.
The bank says key housing indicators are “inflecting,” pointing to firmer private starts, rising mortgage and transaction volumes, and house prices that have started to edge higher again.
Falling borrowing costs into 2026 are expected to provide further support, with affordability improving to 38.1% of income spent on mortgage repayments, down from 42.9% in 2023. Goldman expects this trend to continue as the Bank of England (BoE) cuts rates.
Against this backdrop, the bank launched on six builders, rating three at Buy. Analysts led by Rebecca Parker said their stock preferences are shaped by three factors: geographical exposure, scale and margin trajectory.
They favor builders with greater presence in the North, where affordability is better and recent outperformance is expected to continue, and those with the scale to “quickly respond to evolving demand dynamics.” Analysts also point out the benefit of cleaner margin profiles as companies work through land banks in a lower-inflation environment.
Among the three Buy-rated companies is Barratt Redrow, as the scale from the Redrow acquisition “provides flexibility to respond to demand,” the analysts wrote.
Goldman expects the group to hit its outlet-growth target in the financial year 2030 and forecasts the highest earnings growth among traditional builders on the back of stronger volume expansion.
Persimmon also earns a Buy rating, helped by the most affordable product in the sector and the lowest exposure to the South. Analysts argue that the company’s pricing position and vertical integration support margins, highlighting that its average selling prices are “11% lower vs peers on average.”
Vistry is the third Buy, positioned as the biggest player in affordable housing at a time when the government’s funding commitment and planning reforms are expected to lift volumes. Analysts believe Vistry is “well-placed to capitalise” as the affordable and social housing environment strengthens.
Meanwhile, Taylor Wimpey and Bellway are rated Neutral, while Berkeley is initiated at Sell due to constrained growth in the London market, where slower house-price appreciation and affordability pressures continue to weigh.