Jefferies analysts are bullish on UK housebuilders, describing their valuations as “inexpensive” despite margin pressures. They've pinpointed Persimmon and Berkeley Group as their top picks. This assessment follows downgrades across the sector due to the challenging balance between house prices and construction costs. Investors should watch how these recommendations impact sector performance.

Recent full-year updates prompted lowered profit forecasts for the sector. Jefferies anticipates negative price over cost for most builders in fiscal year 2026, with Persimmon the exception. Despite this, share prices have remained relatively flat. The brokerage suggests that planning improvements and rising affordability are positive drivers for the sector's outlook.

Jefferies believes that improvements in the planning environment will underpin outlet growth and completions from late 2027. They have a “buy” rating on Persimmon with a price target of 1,819p and Berkeley Group at 5,093p. The UK housing market is sensitive to economic shifts, so investors should monitor interest rates and building costs.

Government policy, particularly the Planning and Infrastructure Bill, is seen as a long-term positive. The brokerage notes that customer interest since Boxing Day has been “encouraging.” With lenders signaling an increase in mortgage lending and site levels supporting growth, the sector's performance in 2026 bears close watching. Investors should consider these factors in their portfolio decisions.