UK Housebuilding Sector – Positioning on the Advent of Interest Rates Cut

This report is an updated version of the report published on 18 September 2024 at 06:26 AM GMT +1. 

Section 1.0. UK Housebuilding Sector Landscape, Trends & SWOT Analysis 

Section 1.1. UK Housebuilding Sector Landscape 

The Real Estate market in the UK encapsulates list of companies focused on buying and selling of own real estate, renting, and operating own or leased real estate and fee-based real estate services on a contract basis. Moreover, the overall industry can be bifurcated into two broader sub-sectors such as residential real estate and commercial real estate. Residential Real Estate encapsulates activities such as selling, renting, and buying diverse categories of residential properties. Furthermore, the Commercial real estate process is considered one of the vital indicators to track the performance of the economy. Kalkine’s Sector Report covers the Sector Landscape, Trends & SWOT Analysis, Risks, Recent Business Updates along with the Valuation, Target Price, and Recommendation on the stock.  

Section 1.2. Trends in the Housebuilding Sector 

Section 1.3. SWOT Analysis 

Section 2.0. UK Housebuilding Sector Outlook 

Pending interest rate cuts from the Federal Reserve are expected to positively impact real estate, fostering increased transactions and better price discovery. However, commercial real estate (CRE) continues to face challenges due to slowing economic growth and reduced consumer spending, leading to slower rent growth and lower occupancy rates. CRE finance companies are likely to experience pressure from rising underperforming loans. For CRE services providers, sales and leasing transactions may be at a turning point, while recurring property and facilities management services remain stable. Rated equity REITs demonstrated resilient operating performance across most property types in the second quarter. Meanwhile, homebuilder revenues are anticipated to rise due to increased community counts and closings, although demand in the building materials sector is expected to remain weak. 

After gaining insights into the Housebuilding sector, we should look at the business model of two relevant players listed on the London Stock Exchange.  

Section 3.0. Supermarket Income REIT PLC (LSE: SUPR) (‘Buy’ at GBX 76.80, closing price as of 17 September 2024) 

3.1 Company Details 

3.2. Key Metrics in Pictures 

 3.3 Valuation and Technical Guidance 

Section 4.0 Urban Logistics REIT PLC (LSE: SHED) (‘Speculative Buy’ at GBX 125.80, closing price as on 17 September 2024) 

4.1 Company Details 

4.2. Key Metrics in Pictures  

 4.3 Valuation and Technical Guidance 

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing. 

Note 1: Past performance is not a reliable indicator of future performance.  

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is 17 September 2024. The reference data in this report has been partly sourced from REFINITIV. 

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above. 

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and/ or technical analysis taking into consideration both short-term and long-term scenarios. 

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’ 

Note 6: Dividend Yield may vary as per the stock price movement.   

Technical Indicators Defined: - 

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.