Last week Friday, BofA downgraded UK housebuilders Persimmon (LON: PSN), Redrow (LON: RDW), and Taylor Wimpey (LON: TW.) on the view that 2023 will be a difficult year for the UK housing market.Â
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With soaring inflation and interest and mortgage rates rising, the UK housing market has been pressured, with demand expected to continue to decline further. This week, according to Zoopla, UK house-price growth over the last three months has slowed to its lowest level seen since February 2020, while 2023 will probably see further declines. In addition, the housing website said demand fell 44% year-over-year in the four weeks to November 20.
BofA said in its note last week that the firm expects 2023 to be the most challenging year for the UK housing market since 2008, while the “crucial spring selling season would likely be beset by affordability issues and negative sentiment among buyers.”
BofA analyst Anthony Manning downgraded Persimmon to Neutral from Buy with a 1,400p price target last week, telling investors in a research note that Persimmon has the sector's highest profitability, and he believes it has the greatest near-term risk to volumes.
Redrow was downgraded to Neutral from Buy with a 495p price target, with Manning stating that the consensus is too bullish on Redrow's customers being less price sensitive.
Manning double downgraded Taylor Wimpey to Underperform from Buy with a 100p price target, explaining that the company has the most overall risk, and its large site strategy offers little protection in a period of low demand.
