Source: Sharecast
The bank said that after a tough start to the year, with a 10% drop due to macroeconomic concerns, the UK housebuilding sector has rebounded as those fears have somewhat dissipated.
It has also been underpinned by continued government rhetoric on getting ‘Britain Building’ with supply-side reforms and excitement on potential demand-side stimulus.
"Expanding on the latter point, we note that with affordability still a challenge, there is renewed hope that the Government will enact a form of demand-side stimulus with expectations fuelled by the launch of a HTB evaluation by the Government at the start of the year as well as newsflow that mortgage rules could be loosened by the FCA," it said.
JPM said any discussions are likely to be in very early stages but it’s "heartened" that it now seems to be part of the political discussions.
"In conclusion, with potential demand side-stimulus a wildcard coupled with an abundance of supply-side actions being taken to unlock building, we expect the sector to trend higher," it said.
The bank’s preferred picks are Barratt Redrow, Bellway and Persimmon, all of which it rates at ‘overweight’.
It also said it was placing Barratt on ‘positive catalyst watch’ ahead of its capital markets day on 12 February, where it expects the company to provide a more detailed trajectory of its mid-term objectives following the merger with Redrow. JPMorgan said it believes this is "what the market is waiting for".