Barclays downgrades Persimmon, upgrades Crest Nicholson and Berkeley

Barclays downgraded its stance on Persimmon on Monday, but upgraded Crest Nicholson and Berkeley as it took a look at UK housebuilders.

The bank cut Persimmon to ‘underweight' from ‘overweight’ and reduced the price target to 2,500p from 3,000p.

Barclays said that following recent house price inflation, it expects affordability to come under further pressure in 2022 as interest rates and the cost of living rise.

"Forward order books provide short-term protection to volumes, however, we see particular demand risks for first-time buyers, where rising interest rates have a more pronounced impact on mortgage costs," it said.

"Help to Buy ends in early 2023 and currently accounts for circa 20% of the sector's private sales - this poses a transition risk. Our analysis shows that Persimmon is most exposed to these risks, given its product and customer mix, and we move this to our sole UW (from OW) and have the only negative recommendation on the Street."

Overall, it noted that the sector has underperformed the FTSE 250 by around 10% in the year to date and said that elsewhere, it broadly sees risks priced in and "selective value".

It highlighted Redrow and Vistry, on which it retained its ‘overweight’ ratings. In addition, the bank upgraded Crest Nicholson to ‘overweight’ from ‘equalweight’ and Berkeley Group to ‘equalweight’ from ‘underweight’ following a period of share price underperformance. Their price targets were kept at 430p and 4,460p, respectively.