Jefferies has scaled back price targets across the UK homebuilding sector while retaining Persimmon as its preferred stock, warning that the conflict in Iran could depress forecasts by as much as 25% relative to market consensus.
The brokerage cut Persimmon’s price target to 1,591p from 1,792p but kept a "buy" recommendation on the shares. It kept Barratt Redrow at a "hold" rating while reducing its target to 289p from 418p. Jefferies also lowered Bellway’s target to 2,394p from 3,463p, Crest Nicholson’s to 164p from 230p and Taylor Wimpey’s to 105p from 136p, all while retaining Buy ratings on those names. Berkeley Group remained on a Buy rating with a target of 4,598p.
In adjusting its outlook, Jefferies trimmed completion growth expectations for the volume builders to 2-5% for 2027 and 3-4% for fiscal 2028. The broker incorporated an assumption of a flat sales rate for 2026 and modelled no further official rate reductions or additional government demand support in its forecasts.
On costs and margins, the firm assumed build cost inflation would climb to 4-5% and modelled limited to no house price inflation. As a result, it projected that EBIT margins would decline by 0-1.5 percentage points in 2027 before beginning to recover in 2028.
Despite the weaker forecasts and lower targets, Jefferies argued that current market multiples already embed a significant downside. The brokerage noted that sector stocks are trading on single-digit price-to-earnings multiples and at discounts of up to 60% to net tangible asset value. It set out that sector return on capital employed for 2027 ranges from 5.9% to 13.7% while price-to-net tangible asset values lie between 0.38x and 0.90x.
With regard to Persimmon specifically, Jefferies pointed to the company’s vertical integration, its concentration in northern regions, and the expansion of the Charles Church product range as important cushions against a weaker market environment. The broker added: "With ROCE already ahead of cost of capital, we see the stock at 0.95x P/NTAV as too cheap," and highlighted a single-digit P/E on 2027 earnings combined with potential volume and margin upside if demand proves more resilient as the clearest sign of value.
For Berkeley Group, Jefferies estimated the company could distribute more than 100% of its market capitalisation back to shareholders over five years through dividends and buybacks, while maintaining 15 years of land supply, net cash, and an estimated 15% ROCE by the start of the next decade.
The brokerage warned that trading updates over the coming 12-24 months may be uncomfortable as sales and order books adjust to align with build activity. It also observed that curtailed land purchases and slower investment in work-in-progress - factors not yet reflected in its forecasts - could create additional scope for capital returns to shareholders across the sector.
Sector context
- Jefferies has lowered price targets and forecasts for the major UK housebuilders while keeping a selective buy stance.
- Persimmon is highlighted for its vertical integration and northern focus, which the broker views as defensive features.
- The brokerage assumes rising build cost inflation, flat near-term sales rates, and limited house price inflation in its modelling.