Shares in Barratt Redrow PLC (LSE:BTRW) and Bellway PLC (LSE:BWY) climbed on Friday after Berenberg upgraded both housebuilders to a buy rating.
The broker made the move despite slashing its average profit before tax forecasts for the sector by 15% for 2027, reflecting a deteriorating industry backdrop.
Berenberg cited elevated mortgage rates, higher energy costs, and mounting pressure on margins as the primary drivers behind those forecast cuts.
“Our market view and forecasts reflect a pretty downbeat outlook. However, within this sombre framework we think there are interesting opportunities emerging when we consider three factors: valuation, balance sheet and capital returns,” the Berenberg analysts said.
“Indeed, it is these three factors that underpin the upgrades to buy in this note of Barratt Redrow and Bellway,” they added, spelling out the rationale behind both calls.
Berenberg cut its target price for Barratt Redrow to 348p from 414p, but still argued the shares offer compelling value on current metrics.
The broker noted that Barratt Redrow trades at just 0.6 times tangible net asset value and around 10 times earnings based on its own forecasts.
Berenberg expects Barratt Redrow to close the 2026 financial year holding approximately £600 million in net cash, with total capital returns estimated at around 8% annually.
Bellway received a more positive revision, with Berenberg raising its target price to 2,400p from 2,100p even as profit forecasts for 2027 and 2028 were trimmed by 5%.
The analysts highlighted that Bellway trades at the low end of its historic valuation range, adding weight to the investment case for the stock.
Bellway’s £150 million annual share buyback programme represents approximately 7% of its total market value, a figure Berenberg flagged as a meaningful return for shareholders.
Not all coverage was positive, as Berenberg simultaneously downgraded Berkeley Group to a hold rating from buy following a period of strong relative performance.
The broker said Berkeley Group’s shares have materially outperformed the wider housebuilding sector over the past year, limiting further upside at current levels.
The contrasting moves across the three housebuilders underline how selectively investors and analysts are approaching a sector still navigating a challenging affordability environment.
