Barratt Redrow Shares: Analyst Sees Near-Term Upside

JPMorgan analysts revealed this week that they have placed Barratt Redrow (LON: BTRW) on Positive Catalyst Watch, citing a potential rebound in the UK housebuilding sector driven by government initiatives and improving sentiment.

The bank tells investors that after a 10% decline at the start of the year, the UK homebuilding sector has rebounded 3% year-to-date, as macroeconomic concerns ease and optimism grows over potential government stimulus. Analysts highlight ongoing efforts to boost housing supply and the possibility of demand-side incentives, which could further support the sector.

JPMorgan notes that affordability remains a key challenge, but there is “renewed hope that the Government will enact a form of demand-side stimulus.” 

The bank says the launch of a Help to Buy (HTB) evaluation at the start of the year and speculation that the Financial Conduct Authority (FCA) may loosen mortgage rules have fueled expectations for policy support. While still at an early stage, analysts believe these discussions mark an important shift in the political landscape.

On the supply side, JPMorgan acknowledges numerous initiatives from the Government since its election victory in July, aimed at unlocking housebuilding activity. 

The firm also sees strong earnings momentum potential across the sector, pointing to operating profit scenarios for homebuilders significantly improving by 2029.

“Our preferred picks are Barratt Redrow (OW), Bellway (OW) and Persimmon (OW); we also place Barratt Redrow on Positive Catalyst watch ahead of its CMD on 12 February,” said JPMorgan.

The firm expects Barratt Redrow to provide “a more detailed trajectory of its mid-term objectives following the merger with Redrow, which we believe is what the market is waiting for.”