There are a few chinks of light starting to shine through for the UK housebuilding sector which has been under a heavy cloud for some time.

Companies are reporting modest improvements in sales rates and the latest Nationwide housing market survey showed a surprise 0.5% month-on-month rise in prices after seven consecutive months of falls.

These nuggets, together with suggestions we might see a new Help to Buy policy unveiled by the Conservative Government later this year, provide good reasons for investors to take another look at the housebuilding sector.

We think the wider improvement in sentiment could lead to a reappraisal of the merits of Sheffield-headquartered housebuilder MJ Gleeson (GLE).

It could easily benefit from a new Help to Buy scheme given many of its customers include first-time buyers. The company has long focused on affordability – with its homes aimed at the lower end of the market in the North of England and Midlands. The average asking price on its properties in the financial year ending June 2022 was £167,000 compared with the current UK average of nearly £300,000.

The clarity and success of its affordability strategy meant Gleeson’s shares have often traded at a premium to those of its larger rivals with their broader focus. However, this is no longer the case. Names like Taylor Wimpey (TW.) and Persimmon (PSN) are trading at or above book value while Gleeson is at a 10% discount according to data from Stockopedia.

Gleeson’s 3.4% yield is slightly lower than the peer group but recent cuts to its dividend have been less severe than those seen elsewhere, which speaks to a more sensible and sustainable dividend policy.

The company has always emphasised it was not reliant on the previous Help to Buy scheme, however, fresh support for first-time buyers would certainly be supportive to earnings given this cohort is forecast by Liberum to account for more than 70% of homes sold by Gleeson in the current financial year.

Gleeson could also take market share from other housebuilders as a less rosy economic backdrop and higher mortgage costs pull more potential purchasers into its orbit. Increasing costs of renting are also an incentive for people to get on the property ladder. This should help the company return to volume growth.

Alongside first-half results published on 16 February Gleeson reported a recovery in sales rates after the shock delivered by the mini-Budget, albeit below typical levels for the start of the year.

Alongside its housebuilding arm, Gleeson has a South of England-focused strategic land operation which progresses land through the planning system.

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