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Investing.com - The UK housebuilding sector had a tough start to the new year, but JPMorgan has turned optimistic, expecting a rebound.
After a tough start to the year with a 10% drop due to macroeconomic concerns, the UK housebuilding sector has rebounded, analysts at JPMorgan aid, in a note dated, as those fears have somewhat dissipated coupled with continued government rhetoric on getting ‘Britain Building’ with supply-side reforms and excitement on potential demand-side stimulus.
Expanding on the latter point, we note that with affordability still a challenge, there is renewed hope that the Government will enact a form of demand-side stimulus with expectations fueled by the launch of a HTB (help-to-buy) evaluation by the Government at the start of the year as well as newsflow that mortgage rules could be loosened by the FCA.
“We believe that any discussions are likely in very early stages though are heartened that it now seems to be part of the political discussions,” said analysts at JPMorgan.
The US bank also notes many of the supply-side initiatives taken by the Government since its election victory in July, and says earnings momentum potential remains compelling in the sector.
“In conclusion, with potential demand side-stimulus a wildcard coupled with an abundance of supply-side actions being taken to unlock building, we expect the sector to trend higher,” JPMorgan said.
The bank’s preferred picks are Barratt Redrow (LON:RDW), Bellway (LON:BWY) and Persimmon (LON:PSN), and places Barratt Redrow on Positive Catalyst watch ahead of its Capital Markets Day on Feb. 12, where it expect the company to provide a more detailed trajectory of its mid-term objectives following the merger with Redrow.