JP Morgan has highlighted Persimmon PLC as the housebuilder most likely to gain if the UK government moves forward with plans to reintroduce a Help-to-Buy-style support scheme, according to a research note published Wednesday.
The government is reportedly weighing a revival of the programme to address falling demand for new homes. Unlike earlier versions, any new arrangement under consideration would see developers contribute to upfront costs. The bank points out that developer-government partnerships are not unprecedented - programmes such as HomeBuy Direct and FirstBuy preceded the original Help-to-Buy initiative, which operated from April 2013 to March 2022.
JP Morgan models a variant of Help-to-Buy limited to first-time buyers and estimates it could raise private sales rates by around 10%. That uplift would translate into roughly a 6% increase in private completions on average, the bank says. The research team cautions that the effect would probably be smaller than that seen under past iterations of Help-to-Buy, given the current interest rate backdrop and a narrower scheme scope.
Within the sector, Persimmon is identified as the company best positioned to benefit. The bank attributes this to the group's lower average selling price combined with a relatively high exposure to first-time buyers. JP Morgan also points to Bellway, Barratt, Redrow and Taylor Wimpey as potential beneficiaries of a revived scheme.
JP Morgan notes that Bellway, Barratt and Redrow trade at valuations described as undemanding - around 0.8-0.9x price-to-tangible net asset value - which, in the bank's view, could make them attractive ways for investors to play the theme.
By contrast, Berkeley Group Holdings and Vistry Group are expected to experience a smaller positive effect. Berkeley's higher average selling prices would limit the benefits a first-time-buyer-focused scheme could deliver. For Vistry, JP Morgan highlights that only about a quarter of the company's completions go to the open market, which would also reduce the potential upside from the policy change.
Key points
- JP Morgan projects a Help-to-Buy revival targeted at first-time buyers could lift private sales rates by about 10% and private completions by roughly 6% on average.
- Persimmon is seen as the leading beneficiary due to lower average selling prices and first-time buyer exposure; Bellway, Barratt, Redrow and Taylor Wimpey would also gain.
- Berkeley and Vistry are likely to see less impact because of higher selling prices and a smaller share of open-market completions, respectively.
Risks and uncertainties
- The magnitude of any positive effect from a new Help-to-Buy scheme would likely be smaller than in prior iterations, given the current interest rate environment and the anticipated narrower scope.
- Outcomes for individual housebuilders vary by average selling price and the share of sales to first-time buyers or the open market, introducing firm-level variability in impact.
This analysis reflects JP Morgan's modeling and sector assessment as summarised in the bank's Wednesday research note.