Berenberg lowers target on Bellway, but judges valuation 'undemanding'

In a research note sent to clients, they said: "The underlying fundamentals for the UK housing market remain stable. Employment is high, wages are growing, and mortgage capacity and supply are increasing.

"However, the uncertain political environment (notwithstanding the recent developments) is weighing on sentiment," the analysts also said.

Cost pressures and "more limited" house price inflation meant that the homebuilder's numbers would come under pressure in the near-term, they added.

However, pointing to the firm's history, they believed that the downside risk to their rebased forecasts for the company' margins was "limited", due to the "structural changes to the UK land market."

"At a 14% discount to the wider sector, the valuation remains undemanding, especially in the context of c10% pa growth in TNAV per share. We believe there is potential for a further re-rating should Brexit-related uncertainty lift."

Nevertheless, Berenberg lowered its target price for the shares from 3,790.0p to 3,560.0p.