UK housebuilders face rating shake-up as land, self-help outweigh recovery

Investing.com -- RBC Capital Markets revised ratings across UK housebuilders on Tuesday, upgrading Persimmon and Taylor Wimpey to “outperform” while downgrading Berkeley Group to “underperform” and Barratt Redrow to “sector perform,” prioritizing strategic land holdings over market recovery bets.

"The leaders in 2026 will be those focused on self-help and strategic land," analysts Anthony Codling and Oliver Dyson wrote, as "seemingly lackadaisical local authorities have not played ball with planning, and infrastructure investment has not kept pace with the Government’s homebuilding aspirations," according to the brokerage.

Just 1,410 sites with over 10 plots gained approval between April and June 2025, "marking the tenth successive quarter of decline" and representing "the lowest rolling outturn recorded since the data series began two decades ago," according to the report. 

Average private sales rates across the sector remain at 0.5 to 0.6 per outlet per week,"not as good as the help to buy years or the COVID race for space, but much, much better than they were during the GFC."

Site numbers remain constrained despite mortgage approvals returning to April 2015-to-COVID levels. 

RBC Elements data shows total available homes rising to approximately 14,000 across covered builders, though year-over-year site growth turned positive only recently after extended declines.

Persimmon received an “outperform” rating with a price target of 1,750 pence, up from 1,375 pence under its previous “sector perform” rating.

The company operated 272 average outlets in the second half of 2025 versus 262 year-prior, achieving 3.8% year-over-year growth. 

RBC Elements data shows 7.7% year-over-year outlet increases on its website with 6% growth over three months.

The brokerage describes Persimmon as "leading the field when it comes to site openings" while "working hard to drive demand through a combination of innovative mortgage products, a growing build to rent/partnerships operation" and maintaining sector-leading vertical integration. 

RBC forecasts 6.1% volume growth in 2025 and 5.4% in 2026, with gross margins expanding 87 basis points in 2025 and 20 basis points in 2026.

Taylor Wimpey ’s upgrade to “outperform” came with a price target increase to 150 pence from 130 pence. 

The company disclosed 100% of sites needed through 2026 already have planning permission, over 90% for 2027, and approximately 65% for 2028. Its controlled landbank spans 75,651 plots representing 6.6 years of forward supply.

RBC forecasts 4.7% volume growth in 2025 and 3.3% in 2026, with gross margins declining 130 basis points in 2025 before recovering 24 basis points in 2026 and 89 basis points in 2027. 

The company operated 212 average sites in 2025 with expectations for 223 in 2026 and 240 in 2027, representing 5.2% and 7.9% growth respectively.

Berkeley dropped to “underperform” with a price target cut to 3,700 pence from 4,900 pence. The November budget introduced council tax surcharges from £2,500 to £7,500 on properties exceeding £2 million starting April 2028, while property income tax rates increase 2 percentage points from April 2027. 

The Office for Budget Responsibility estimates 10 basis points annual house price inflation reduction from 2028.

RBC cut Berkeley’s FY2026 pre-tax profit estimate 34% and FY2027 by 54%, reflecting expectations that "the mansion tax and the increased taxation on landlords will impact London focused Berkeley more than any other housebuilder we follow." The company’s landbank spans 13 years of forward supply across 67 average sites.

Barratt Redrow’s downgrade to “sector perform” included a price target reduction to 450 pence from 575 pence. 

The brokerage noted "a trip and slip in the building safety due diligence" following its Redrow acquisition, adding "in terms of volumes, so far, the whole is less than the sum of its parts" while operating without a Group CFO.

The combined entity operated 405 average outlets in FY2025 versus 443 prior year. RBC forecasts flat site numbers in FY2026 before 6.2% growth in FY2027, with volume growth of 5.1% and 8.2% respectively. Pre-tax profit estimates fell 5% for FY2026 and 10% for FY2027.

Build costs rose approximately 25% since September 2022 while house prices stalled, creating "limp lettuce landbanks" where margins eroded on land purchased over three years. 

At sales rates of 0.5 homes per site weekly, "a 150 unit site will take around three years to sell through," delaying recovery until sites clear the profit and loss statement.

RBC forecasts 0 to 50 basis points gross margin improvement across most builders in 2026, significantly below consensus. 

Savills cut 2026 house price inflation estimates to 2% from 4%, with RBC data showing "the average weekly house price change is c.£100 lower (more negative) than this time last year."

Bellway maintained “sector perform” at 3,150 pence, Crest Nicholson held “outperform” at 205 pence, Vistry kept “underperform” at 475 pence, and Gleeson remained “underperform” at 400 pence.