Housebuilder Barratt Developments has started to see its recent recovery falter, and its shares are down again today after an analyst downgrade.
Recent house price figures from the Nationwide and Halifax showed property prices rising, and naturally this gave a boost to the sector. But Rudolf Dreyer at Goldman Sachs is not entirely convinced, saying in a note:
"The May 2009 house price increase is not the start of a new upward trend in our view. We continue to forecast a second quarter 2010 trough to coincide with peak unemployment and no meaningful recovery in the 12 months thereafter. In the 1990s, the average house price took more than three years to recover 5% from its first quarter 1993 level (when unemployment peaked).
"Following the strong performance of leverage since March, we believe the relationship between financial leverage and discount to net asset value creates relative investment opportunities. We raise Bovis Homes to buy (from neutral), downgrade Barratt to neutral (from buy) and add Redrow to the conviction sell list as we believe its valuation does not reflect the risk implicit in its relatively high financial leverage."
Barratt has dropped 11.5p to 148.75p, Redrow is 4.75p lower at 186.5p, while Bovis is also lower, albeit less so in percentage terms than the other two. Its shares have fallen 6p to 376.75p.
