* Credit Suisse calls top on UK housebuilders' rally
* Bucks consensus as others see further double-digit gains
* Sector average 34 percent below intrinsic value-StarMine
* Demand to sell the sector short falling from low level
By Tricia Wright and Simon Jessop
LONDON, March 7 On the day another housebuilder
joined the UK's leading share index, Credit Suisse bucked the
consensus and called the top of the market for one of the year's
The Thomson Reuters UK Homebuilding index
has risen 10 percent in 2014. It doubled in value during the
past three years, underpinned by tight supply and UK initiatives
to spur the job-intensive sector, such as the 'Help-to-Buy'
After the Credit Suisse note, stocks in Bellway,
Taylor Wimpey and Persimmon fell 2 to 3 percent -
on the same day Barratt Developments won promotion to
the FTSE 100.
Credit Suisse said house prices may well rise further, but
it reckoned any good news was already priced into shares.
Meanwhile, more competitive land valuations and rising mortgage
costs could derail the rally.
"We recognise we may be a little early on this call, but
given the huge performance in sector share prices over the past
three years and the potential for sentiment to turn very
quickly, we suggest, when considering the risk-reward balance,
that it is prudent to take profits now," the investment bank
said in a note.
Data from Thomson Reuters StarMine suggest the rally in
housebuilders could maintain its momentum for the time being.
And negative bets on the sector are decreasing.
Analyst sentiment remains bullish, even towards the best
performers. Around three-quarters of StarMine's top-rated
analysts have "buy" or "strong buy" ratings on Barratt
Developments and Bovis Homes, which have gained
about 30 percent and 15 percent respectively this year.
StarMine shows the firms in the sector trade at an average
discount of 34 percent to intrinsic value.
The data rank companies based on the relationship between a
firm's stock price and its most likely growth trajectory, using
historical models and adjusting for analyst bias.
Meanwhile, Markit data show average short interest - selling
borrowed shares, hoping to buy them back more cheaply and pocket
the difference - is at just 0.2 percent, having dropped from
around 0.5 percent in December.
George Godber, the manager of the CF Miton UK Value
Opportunities Fund, owns shares in Redrow, Bellway
and Crest Nicholson, and he expects they will
continue to rise over the next 12 months. "I still think there's
20-30 percent to go," he said.