Deutsche Bank upgrades Berkeley, downgrades Persimmon
Deutsche Bank reviewed its ratings on several UK housebuilders on Friday as it considered the outlook for 2022.
The bank lifted Berkeley Group to ‘buy’ from ‘hold’ and hiked the price target to 5,429p from 4,555p. It also upgraded Crest Nicholson ‘buy’ from ‘hold’, but cut the target price to 438p from 442p.
DB downgraded Countryside Properties to ‘hold’ from ‘buy’ and slashed the price target to 342p from 521p. Persimmon was also cut to ‘hold’ from ‘buy’, with the target price reduced to 2,897p from 3,268p.
The bank said bulls point to buoyant house prices - sufficient so far to offset rising build costs, despite new build lagging the wider market - scope for enhanced shareholder returns, powerful orders books, and ongoing government support.
"But there’s no need for bears to hibernate," DB said. "Rising tax leaves earnings per share flat for most (corporate tax rises from next April, the developer’s levy comes in a year earlier, and just as builders had risen from the canvas, the government lines up the big right hand and demands more).
"Whether the net effect of inflation stays favourable is a moot point as existing contracts roll off."
Deutsche noted that land prices are rising fast and the planning system is "creaking".
"The spectre of rising interest rates, a perennial anxiety, seems less impactful given affordability headroom, though pressure on household budgets is intense, exacerbated by spiralling energy costs," it said.