Citi downgraded Redrow on Monday to ‘neutral’ from ‘buy’ as it said the risk/reward now looks more balanced at the current valuation.
“Although a modest normalisation in mortgage rates should reduce the risk of a steep house price decline, we believe the elevated rate environment still drives materially lower demand and site absorption impacting the trajectory of the outlet pipeline on a two to three-year view,” it said.
“In addition, the softer trends noted in recent trading point to a higher risk of cancellations and incentives across the home mover regional markets, which may have been the biggest beneficiary of the strong market dynamics since the pandemic and represent a core part of the group’s exposure.”
Citi said it also believes the recent investment in divisional growth in Crawley hinders scope for significant overhead optimisation in the near term if market conditions worsen from here.
The bank has a 477p price target on the shares.
At 1030 GMT, Redrow shares were down 2.7% at 457.40p.
