As new data gives an optimistic outlook for the UK property market in 2025, here are some of stocks that could benefit from the sector’s rebound.
The latest closely-watched survey from the Royal Institution from the Chartered Surveyors (RICS), published on Thursday, showed that many estate agents and other professionals in the sector expect property sales and house prices to rise in 2025.
A net balance of 37% of respondents to the December survey said they foresaw sales activity rising over the next 12 months, while a net balance of 53% envisaged prices climbing higher over the year ahead.
Simon Rubinsohn, chief economist at RICS, said that the survey “points to a further improvement in sentiment in the housing market despite concerns about the potential impact of rising bond yields on borrowing costs.”
A recent sell-off in UK government bonds, prompted the yields — effectively the interest rates on these debt instruments — to surge.
Rubinsohn said: “Signals from the survey around expectations over the next twelve months also remain solidly positive for now.”
“However, the resilience of the uplift in market mood could be tested if the mortgage rates do begin to climb in a material way over the coming months,” Rubinsohn said. “That, critically, would also be a concern for developers who will want to see a solid market as a backdrop for ramping up housebuilding to help meet the government’s ambitious 1.5 million homes target for this parliament.”
Concerns have been brewing that “stagflation” — where inflation persists but economic growth stagnates — was taking hold in the UK. This led investors to question whether the Bank of England (BoE) would leave interest rates higher for longer, which could keep mortgage rates higher and weigh on property market activity.
And in further positive news for the property market, online platform Rightmove (RMV.L) said on Monday that the average UK house price rose by nearly £6,000 in January, with buyer activity also up this month.
More confidence and activity in the property market could prove positive for a number of companies in the sector, particularly housebuilders. Here are the stocks in the sector highlighted by experts.
New data gives an optimistic outlook for the UK housing sector in 2025. ·Owen Humphreys – PA Images via Getty Images
In a recent note, Barclays (BARC.L) equity research analyst Emily Biddulph said her team had a positive outlook for the UK housebuilding sector in 2025.
“We see limited earnings risk and we think that, following a 25% sell-off of the sector through Q4, fundamental valuation screens as attractive, even if recovery in sector returns is slow,” she said.
One UK housebuilder that Biddulph said her team were upgrading to an “overweight” rating was Berkeley Group (BKG.L), according to the note published on 7 January.
“We expect our upgrade to [overweight] on Berkeley Group to be viewed as a contrarian call,” she said. “While we acknowledge that this could be early to turn positive on Berkeley, we disagree with the consensus view that H1 results were a negative catalyst and see a particularly compelling long-term value opportunity in the stock.”
In its interim results, released in December, Berkeley posted a nearly 8% fall in profit before tax year-on-year to £275.1m ($338m).
However, Berkeley CEO Rob Perrins said that the firm remained on track to deliver pre-tax profit guidance of £525m for the full year and at least £450m for the 2026 fiscal year.
Shares have continued to slump following these results and are down nearly 25% over the past year.
The housebuilder also unveiled the launch of a new 10-year growth strategy in its results, which Biddulph said Barclays analysts viewed as a “material positive, given that in the past Berkeley group has called cycles well, by both investing in land and WIP before its peers, driving much stronger than average returns.”
Biddulph said Barclays maintained an “overweight” rating on Bellway, which is listed on the FTSE 250 (^FTMC).
“While Bellway was the best-performing housebuilder we cover in 2024 … we still view it as an undervalued relative safe haven, where we are most confident in both ability to deliver on consensus expectations … and meaningful medium-term growth,” she said.
In its preliminary results, released in October, Bellway reported a 30% fall in revenue to nearly £2.4bn for the year ended 31 July 2024. The housebuilder also posted a nearly 58% drop in profits before tax to £226.1m.
However, Bellway CEO Jason Honeyman highlighted that “improving trading conditions and our strong outlet opening programme has generated a healthy increase in the year end order book.”
“As a result, we are well-placed to deliver a material increase in volume output in financial year 2025,” he said.
Despite those results, shares in Bellway are down just close to 8% over the past year.
Barclays has kept an “overweight” rating on Barratt Redrow, whose merger was given the green light in early October.
In an update later that month, Barratt Redrow said the integration of the two companies was underway to deliver at least £90m in “cost synergies”.
The merged company said also it was expected to deliver between 16,600 and 17,200 home completions in the 2025 fiscal year.
Despite the news around the merger, shares have lagged over the past couple of months and are down nearly 18% on a one-year basis.
Biddulph said Barclays analysts kept an “overweight” rating on the stock “on the basis that we see higher-than-average valuation upside, and earnings estimates as being relatively well underpinned.
“While an underlying decline in outlets in FY25 has been an overhang on the stock, as the focus moves on to FY26 through this year, we expect Barratt to rightly, in our view, start to be viewed as a growth name again,” she said.
In a Deutsche Bank note released last week, analyst Chris Millington changed his recommendation on the housebuilder Persimmon from “hold” to “buy”.
The upgrade came after Persimmon released a 2024 trading statement, in which it said new home completions were up 7% for the year to 10,664.
The housebuilder said the average selling price had also risen 5% to around £268,500 this past year.
Persimmon said it expected profit before tax for the year to come in at the upper end of market expectations of between £349m and £390m.
Millington said: “Whilst we think other companies are better placed for a recovery in volume/profits, after the circa 40% decline in Persimmon’s share price since mid-October, we think that valuation attractions are emerging, even with the prospect of future returns being much lower than pre-Covid levels.”
Aarin Chiekrie, equity analyst at Hargreaves Lansdown (HL.L), said government policy was looking promising for certain housebuilders.
“Plans to ease planning consent should be especially favourable for housebuilders with large landbanks awaiting detailed planning permission, like Persimmon and Taylor Wimpey (TW.L),” he said “The goal of building 1.5 million new homes over a five-year period looks a bit too stretching given where we’re at currently, but the ambition is commendable.”
“Given that the housebuilding sector has seen share prices fall sharply toward the back end of 2024, some valuations are now looking very attractive, as long as investors have the patience to ride out the inevitable ups and downs over the coming years,” he added.
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