Barclays ups Countryside Properties to 'overweight', lifts Partnerships valuation

"Partnerships, which currently delivers around half of the group’s operating profit, lowers risks in myriad ways: phased viability (which confers the option, but not the obligation, to do future scheme phases); a much higher affordable homes content (which significantly reduces pricing exposure); and lower planning risks (no refusals to date)."

It also said there is an opportunity to roll out the Partnerships division at low capital outlay, adding that the new Midlands division has made a strong start.

Barclays pointed out that Countryside shares have been among the best performers in the sector in the last 12 months.

In the same note, the bank said that overweight-rated Crest Nicholson is its top pick in the homebuilding universe.

"Emerging from a 2017 financial year in which its volumes rose only modestly (circa 2%), we believe Crest now faces a far more exciting period of growth (we forecast circa 7% in 2018E and circa 15% in 2019E, powered by two new divisions). We expect the rewards for delivering on this to be significant."

Among the 12 stock in its coverage, Barclays rates just three at overweight and said it remains cautious.

Housebuilding fundamentals have been impacted by weak consumer confidence, the Brexit debate, November’s 25 basis points rate hike - with the same again expected in the Autumn - and the sluggish second-hand market, it said. Nevertheless, the bank argued that it's still a good time to be a housebuilder.

"Backed by Help to Buy, low mortgage rates and lenders that are open for business, it remains a good time to be buying land (high gross margins still available) and selling houses, apart from the higher price points (largely, though not exclusively, in central London) or where second-hand market reliance is significant (McCarthy & Stone the best example)."

At 0925 GMT, the shares were up 1% to 313p.