HSBC upgrades Berkeley, expects help-to-buy fillip for housebuilders

(Sharecast News) - Berkeley Group was the standout gainer on the FTSE 100 on Wednesday as HSBC upped its rating on the stock to 'buy' and said it now has 'buy' ratings on all nine listed housebuilders under coverage.
"The decisive general election result has brought the prospect of a final settlement of Brexit closer and unleashed pent-up demand in housing activity that we are forecasting to induce a full year 2020 3% rise in UK-wide new home sales reservations," it said.

HSBC said it expects the restriction in the government's help to buy equity loan system to first-time buyers from March 2021 to contribute to this rise in the sales rate.

The bank upgraded Berkeley from 'hold' and hiked the price target to 6,620p from 4,540p, saying it's set to deliver the second-highest return on invested capital in the sector. HSBC noted the shares are up 56% since 2019 lows, in-line with sector's 54% rise.

"The current share price, in our view, is not fully pricing-in the improvement in near-term London housing market as well as the wider south East housing market and long-term prospects," it said.

The bank's preferred picks in the sector are Barratt Developments, Bellway, Redrow and Crest Nicholson.

"They all have a majority weighting to southern England, where we expect the impact of the change in our housing market forecasts, and therefore EBIT and invested capital forecasts, to be greatest," it said.