Barratt Developments, Bellway and Berkeley Group PLC had their ratings cut by Jefferies as the US broker tried to work out the costs of their potential cladding liability.
“The costs of cladding as an issue will become loud in the coming 2-3 months,” said Jefferies.
“With a potential addition £4bn bill for cladding remediation, the UK Housing Minister last week appeared to ramp up pressure on the building industry as a whole, and in particular the developers, to foot the cost.”
The broker believes the government will make life as difficult as it can for the builders before final details of the proposals are published at Easter.
London builders are the most exposed, argues the broker, as 55% of high rise buildings need remediation, which is likely to mean further provisions for carrying out the work.
“At this stage, we believe even the housebuilders themselves do not know the full extent of the cost (M&A through the period, lack of access, uncertain 'solutions', labour constraints, clawback from freeholders).”
Barratt, Bellway and Berkeley are all now rated ''hold', from 'buy 'previously and shares in all three fell further today after big drops for the sector overall since the start of the year.
Berkely dropped 4.6% to 4,169p, Bellway 4.5% 2,850p with Barratt the worst hit with a drop of 6.5p to 630.6p.