The five housebuilders in our PIN Fund made an average loss of 1.3% in the third quarter of this year. However, the Fund made a 2.6% return overall, thanks to the continued strong performance of our two self-storage providers (Safestore Holdings and Big Yellow Group). There was also a special one-off dividend from Berkeley Group, which equated to around 8% of the share price.

The UK housebuilders have not performed well over the past six months though, but analysts at Jefferies have urged investors to hold their nerve with housebuilder stocks, which they insist are ‘still too cheap’.

The firm adds: ‘Despite high single-digit EBIT growth forecasts for the coming two years, and the potential for upside to forecasts, the volume housebuilders trade at an average 2022 P/E (price to earnings ratio) of less than 10x. However, it may well be dividend yield which proves the main attraction, with the potential for special dividends in 2022 to push yields to double-digit levels.’

Jefferies expects some housebuilders to build strong net cash positions that will likely be re-invested into land and further construction, offering the opportunity for another leg of growth. It adds: ‘However, the larger cap stocks we believe will revert to returning significant capital to shareholders, and we believe scale and timing of these returns will be the key discussion topic in the coming months. Dividend yields in the sector already average 5%, and up to 8% at Persimmon. And even though definitions of ‘excess cash’ may (or may not) have moderated since Covid, we believe balance sheets offer scope for capital returns in the sector to exceed 10% pa.’

The firm concludes: ‘Updates from the UK housebuilders in the past weeks have proved reassuring - demand remains robust even after the end of the stamp duty holiday, there is upwards momentum in selling price, a positive spread of price over cost, and strong cash flow despite investment in land and build.’