UBS said the sector offered an attractive 22% ‘upside’ in total shareholder returns following a “challenging” first half
The FTSE 100 risers list was awash with housebuilders, which were given a double boost on Tuesday.
Reports that the Right to Buy subsidies may be maintained came as a surprise but welcome development from the Treasury.
At the same time, the London arm of the Swiss bank UBS re-assessed the potential of a clutch of UK builders, taking a more positive stance in the process.
UBS said the sector offered an attractive 22% ‘upside’ in total shareholder returns following a “challenging” first half.
It said it sees demand levels improving, with house prices remaining stable. It added that while the economic backdrop remained “challenging”, with the rising unemployment rate a worry, the “positive fundamentals” remained in place.
These include record-low interest rates supporting affordability; continued government support such as the aforementioned Right to Buy and the stamp duty holiday announced in the Budget; and further consolidation within the sector.
The key areas of risk, UBS said, continued to be a “material decline” in house prices; further lockdown restrictions; and a “disorderly” Brexit.
On the potential extension to the Help to Buy scheme, the Financial Times provided this nugget: “Three government figures confirmed that Whitehall discussions were taking place to resolve the issue, with an announcement expected as early as Friday. However, they insisted that the precise details were yet to be finalised.”
Builders dominate the FTSE 100 risers list
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“Fears surrounding a potential spike in bankruptcies and job losses remain an issue for banks, yet the housing sector still has the opportunity to enjoy a particularly strong period as previously hesitant movers finally take the plunge thanks to government incentives,” said from Joshua Mahony, senior market Analyst at IG, the spread betting group.
Alongside the stamp duty holiday, the extension of Right to Buy, prime minister Boris Johnson’s promise to relax planning restrictions for new builds, and the £12bn investment in 180,000 affordable homes “goes to highlight the boom that could be ahead for the sector”, Mahony added.