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Investing.com -- The outlook for UK housebuilders entering 2026 reflects cautious optimism after a volatile 2025 in which the sector ended the year flat compared with gains of 19% on the FTSE 100 and 6% on the FTSE 250.
Performance remained highly uneven across companies such as Persimmon, Vistry and Bellway rose about 14% on average, while Barratt Redrow, Berkeley, Taylor Wimpey and Crest Nicholson fell around 10% on average, according to analysts at J.P. Morgan in a note dated Thursday.
The brokerage cites several factors shaping expectations for 2026, including falling mortgage rates, policy developments and signs of pent-up demand following political and fiscal uncertainty.
Mortgage rates have declined from 4.65% at the start of 2025 to 4.22% and J.P. Morgan economists expect three further Bank of England rate cuts, bringing rates to 3.25% by June 2026.
The brokerage notes that affordability pressures may ease if this reduction continues to filter through, although demand-side stimulus from government policy has not emerged.
From an operating standpoint, completions are expected to rise about 3% in 2026 across the sector, though performance is set to vary. J.P. Morgan expects mid-single-digit growth for Persimmon , Barratt and Bellway , low-single-digit growth for Crest Nicholson , Taylor Wimpey and Vistry, and a slight year-on-year decline for Berkeley.
Average selling prices are forecast to increase about 1.5% in 2026, while low-single-digit build-cost inflation could limit margin improvement.
Revenue growth is projected at roughly 3% year-on-year and earnings growth around 7%, with estimates about 1% below consensus due to conservative assumptions on completions.
Policy remains a significant variable. The sector expects clearer effects from the UK government’s supply-side reforms and the Planning and Infrastructure Bill, now in its final approval stage.
However, uncertainty over tax and housing policy through multiple 2024-25 fiscal events weighed heavily on market sentiment, and the brokerage notes that a calmer political environment could support confidence in early 2026.
Local elections next year could create incentives for additional housing measures, according to the analysts.
Valuations provide another support pillar. The sector trades at 0.9x price-to-tangible-net-asset value, around a 30% discount to its long-term average of 1.3x.
J.P. Morgan also flags pent-up demand following a “wait and see” response to speculation around stamp duty in the Autumn Budget.
The brokerage maintains “overweight” ratings on Persimmon, Bellway and Barratt Redrow, while Berkeley Group, Taylor Wimpey, Crest Nicholson and Vistry are rated neutral. Persimmon is named the top pick.