LONDON (ShareCast) - (Sharecast News) - Broker Berenberg expects the UK construction market to flatline in 2024 before returning to growth, and highlighted a number of key buying opportunities for investors.

Berenberg said 2023 will likely be "one of the most challenging years in recent history" for the UK construction sector, with activity down 10%.

Residential volumes will fall 21% overall - owing to the surge in mortgage rates, the cost-of-living crisis and subsequent falling demand - compared with just a 3% decline in non-residential building and a 1% increase in civil markets.

"While construction markets remain challenging, we think we are close to the trough in most markets and while we do not anticipate any material recovery in 2024, we think this backdrop presents plenty of attractive investment ideas," the broker said.

"The silver lining of a brutal 2023 is that it makes for an easier base for 2024 and we forecast no further declines, in total, next year, although we also stop short of forecasting growth with our 0% estimate. Beyond 2024, we think the UK construction returns to its trend long-term growth of c2% per annum, on average, underpinned by a new housing market that still remains fundamentally undersupplied and well-below government targets. "

Berenberg highlighted six key 'buys' among UK-listed construction stocks: Berkeley (5,100 target price) on the strength of its order book, forward sales position and cash generation approach; Grafton (1,050p target price) on its capital allocation and investment opportunities across Europe; Genuit (400p target price) due to the growing demand for sustainable construction products; Howden (870p target price) with its expanding depot network, improving distribution and international potential; Volution (500p target price) with regulatory developments expected to drive demand for its energy-efficient ventilation products; and Hill & Smith (2,000 target price) on its potential to expand its North American operations.

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