RBC Capital upgrades Taylor Wimpey, downgrades Berkeley

RBC Capital Markets upgraded Taylor Wimpey on Friday but downgraded Berkeley as it took a look at the two UK housebuilders.

Taylor Wimpey was raised to ‘outperform’ from ‘sector perform’ with an unchanged price target of 175p.

"Taylor Wimpey has the wind behind its sales, and we like the cut of its jib," RBC said.

"Of the housebuilding majors it is the least distracted by management change, strategic change or potential M&A activity.

"We believe it is reading the weather well: that the weather is improving. With all hands on deck it may be the first to react to improving market conditions and the first of the large caps to meet its medium-term goals."

The bank also said that while volume growth is a story for 2025 and beyond, the dividend is a key part of the story today.

"The shares offer a highly stress tested yield of 5.4%, and with interest rates likely to fall this year we would advise those looking for income tomorrow to lock in this yield today."

RBC downgraded Berkeley Group to ‘underperform’ from ‘sector perform’, keeping the price target at 4,950p.

It said Berkeley Group is the classic flight to safety stock, "with a forward orderbook other housebuilders can only dream of" and homebuyers less sensitive to mortgage availability and mortgage rates.

"However, we believe that the housing market is on the turn, and with sales largely locked in for FY2024, FY2025 and FY2026, others are likely to benefit more from the improving market than Berkeley.

"Therefore, we believe that investors will be setting their flight paths to 'sizzle' rather than 'safety' and on a sector relative basis we are downgrading Berkeley Group to underperform."