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Are housebuilders cheap, or a value trap?

Former City analyst Robin Hardy runs the rule over the valuations of the housebuilding sector
September 13, 2022

Is now a great time to buy? While often parodied as a trite statement from estate agents to prospective buyers, it is a fair question to ask about the valuation of UK housebuilders. 

 

The sector has fallen by a half in the past year, price/earnings (PE) ratios are well into single digits and yields are high, in some cases into double digits. So, the sector is exceptionally cheap and presents a huge buying opportunity, right? Not necessarily. In a recent article on housing (‘Is the housing market structurally sound?’, IC, 2 September 2022), we looked at the macro environment and assessed the pressures and risks bearing down on UK house prices. Now we turn to the most available route for investors to invest, albeit tangentially, in the housing market – the UK’s listed housebuilders.

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