Persimmon Plc (PSN), the U.K.’s largest homebuilder by market value, rose the most in five months after HSBC Holdings Plc predicted a surge in the market for new homes and raised its price prediction on the shares by 27 percent.
Persimmon was upgraded to overweight from neutral and the target price for the York, England-based company was increased to 957 pence from 755 pence, HSBC Global Research said in a note today. All of the U.K.’s seven publicly traded homebuilders had their target price raised by more than 20 percent.
“We think sales rates, pricing, margins and return on capital will all beat market expectations in 2013” across the industry, analysts including Jeff Davis said in the note. Homebuilders’ shares are still too cheap in a recovering market, the bank said.
The Bloomberg EMEA Homebuilders Index (BEUHBLD) has climbed 58 percent this year as companies benefit from government efforts to stimulate growth and increase mortgage lending. Barratt Developments Plc (BDEV), the biggest U.K. homebuilder by volume, is leading the index with a 110 percent increase this year. Persimmon’s advance put it in second place at 70 percent and Taylor Wimpey Plc (TW/), builder of the second-most homes, has risen about 55 percent.
U.K. mortgage approvals rose more than economists forecast in October in a sign the Bank of England’s credit-boosting plan, the Funding for Lending Scheme, may be starting to buoy the market for home loans. Lenders granted the most mortgages since January, the central bank said late yesterday in London.
“We expect a 7 percent rise in mortgage advances for house purchases and a commensurate rise in mortgage approvals and housing transactions in 2013,” HSBC’s Davis said in the note. “The Funding for Lending Scheme will underpin 10 billion pounds ($16 billion) to 15 billion pounds additional gross mortgage advances next year.”
Persimmon climbed as much as 6.7 percent in London trading, the most since June 29. The stock was up 3.2 percent at 796.5 pence as of 4:30 p.m. close of trading. Barratt was up 2.5 percent at 194.9 pence at the London close.
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