JPMorgan upgrades Bellway and Crest Nicholson, downgrades Taylor Wimpey

(Sharecast News) - JPMorgan Cazenove upgraded Bellway and Crest Nicholson on Thursday but downgraded Taylor Wimpey as it took a look at UK housebuilders. JPM said housebuilders have endured a "turbulent" year. It said they bounced after the summer following the UK election - which at one point led to shares being up 19% year-to-date - before reversing entirely and ending the year down 12%, compared to +7%/+8% for the FTSE250/FTSE100.

"This underperformance has surprisingly come in the context of (1) Labour's election victory and subsequent Government initiatives and announcements on overhauling the planning system in order to stimulate the building of homes; as well as funding to boost the building of affordable homes and 2) a gradual decrease in mortgage rates whereby 2-Yr Fixed Rate as reported by the Bank of England is now at 4.41% versus 5.03% at year-end December 2023," it said.

JPM said it continues to see strong earnings momentum in the mid-term, as the Government continues to focus on facilitating homebuilding in efforts to reach its target of 1.5m homes over this parliament with margins recovery on the way.

"However, we now expect the speed with which this materialises to be much more tempered as Local Authorities take time to adopt key reforms made by the Government as well as rates potentially staying higher for longer due to higher government borrowing announced at the Budget potentially impacting affordability," it said.

"We also note some new questions marks on build cost inflation as well as demand/affordability following recent measures in the Autumn Budget to increase the stamp duty burden on homebuyers."

Overall, the bank maintained its positive stance on the housing sector and said it sees scope for it to trend higher in 2025, where it forecasts completions up around 8% and average selling prices up about 1.5%.

JPM downgraded Taylor Wimpey to 'neutral' from 'overweight' and cut the price target to 150p from 170p saying it sees potential earnings risk ahead.

It upgraded Crest Nicholson to 'neutral' from 'underweight' and lifted the price target to 190p from 180p given the shares are now on 0.5x P/TNAV.

JPM also upgraded Bellway, to 'overweight' from 'neutral', keeping the price target at 3,290p, citing a supportive valuation.

It remained 'overweight' on Barratt Redrow and Persimmon and 'neutral' on Berkeley Group and Vistry.