Key Takeaways:
- Elevated interest rates, cost inflation, and cooling property prices are all challenges for UK housing stocks.
- Persimmon has raised forecasts for completions in 2026 to 12,500 this year, up from 11,900 in 2025.
- But Barratt Redrow is the favored stock in the sector among Morningstar analysts.
Ollie Smith: Now is not a great time to be a UK housebuilder. Build cost inflation is threatening margins, interest rates are still elevated, and affordability fears are giving buyers pause for thought. House price growth is stalling across the UK, and prices are falling in many areas.
Persimmon PSN reflects this uneasy existence as a highly cyclical stock. Shares are off around 15% so far this year and down around 60% over the last five years. This isn’t as bad a year as 2022, when the shares halved, but negative sentiment is still not hard to find. Plenty of UK housebuilder stocks are being shorted, and Persimmon is no stranger to the FCA’s daily list of shares that professionals are betting against.
Were Persimmon’s Latest Earnings Impressive?
Persimmon’s most recent results, released in August, were ahead of expectations in terms of completions and selling prices, says Morningstar equity analyst Jack Fletcher-Price. The company even raised forecasts for completions in 2026, which are now expected to hit 12,500 this year—up from 11,900 in 2025.
For the six months ending June 30, the company delivered a 13% increase on new home completions, a 15% increase in pretax profits, and maintained its interim dividend at 20p per share. The dividend yield is on Persimmon stock is now above 5%.
At around £11.55 per share, Persimmon stock is currently trading below its Morningstar fair value estimate of £12.80, reflecting the potential upside available to patient investors in this stock. Morningstar’s Fletcher-Price says its industry-leading build-cost efficiency makes it well placed to withstand trouble. A focus on cheaper homes, as well as on building houses in areas outside London and the south east, are also advantages, he says.
Should I Buy Persimmon Shares
Investors could be forgiven for needing more convincing of this stock’s merits, at least in the short term. There’s plenty of uncertainty to get through, including what happens to interest rates and whether the new Andy Burnham government gets to build the houses it’s promising.
For now, Morningstar’s preferred stock in the sector is Barratt Redrow BTRW, which is also undervalued and the subject of activist investor calls for stock buybacks. For Morningstar, I’m Ollie Smith.
