Broker snap: Housing market difficult, but stable in 2011

8th Feb 2011 13:04

With a recent housing market survey showing a sluggish start to the year, Panmure Gordon's opinion is that the outlook for UK residential housebuilders remains difficult, but broadly stable, and highlights two key recommendations in the sector.The Royal Institution of Chartered Surveyors (RICS) reported low levels of property supply from sellers in January, matched by a lack of demand among buyers. RICS also noted that the most significant house prices falls are in the East Midlands, Yorkshire and Humberside, whilst London and the South East remains firm, in line with Panmure's expectations for 2011.Its "smaller-end" sector recommendation is Galliford Try, which is undergoing something of a transformation at present as it has bought large amounts of land in the South East and England.Additionally, the broker says its "housebuilding operations are likely to treble over the next couple of years," and issues the stock with a 'buy' and 433p target price.The "larger-end" suggestion is Barratt Developments, which the broker says is based on "deep value, with the stock trading on a 55% discount to tangible net asset value (NAV)."As Panmure doesn't foresee any significant dilution in the coming months, it says the NAV discount looks unjustified and labels the group a 'buy' with a target price of 147p.