What drives value in UK housebuilding and construction
Housebuilders are under pressure as rising costs and higher debt meet cyclical demand and planning risks. Our latest analysis reveals how earnings, valuations, cash flow and risk shape market value — and what this means for Management Teams, Investors, Lenders and Lawyers.
Margins in recovery
Development margins fell sharply between 2021 and 2023, but recovery is now under way as house price growth stabilises against flatter build cost inflation.
Growth credibility drives valuation
Listed housebuilders’ multiples show a 71% correlation with two-year earnings growth expectations highlighting the importance of growth credibility in valuation outcomes.
Insolvency risk for smaller operators
Insolvencies in the sector remain double 2020 levels, underlining the risk facing smaller operators.
Liquidity strains and debt pressures
Liquidity and debt costs continue to bite as companies with weaker cash conversion remain vulnerable.
Conversion pressure: The hidden driver of insolvency
The four key cash conversion risk factors are placing mounting pressure on operators across the sector. As liquidity tightens and profitability becomes harder to realise, the direct consequence is a rise in insolvencies, especially among smaller businesses with limited buffers and less access to flexible financing.
This trend underscores the urgent need for disciplined cash management and credible growth planning.
Valuation multiples and market signals
Market multiples in UK housebuilding are tightly linked to expected earnings growth.
Our 10-year analysis shows a 71% correlation between EV/EBITDA and 2-year forward growth.
Flat-growth firms (~0%) typically trade at 5–7x EBITDA, while those growing ~10% annually command 6.5–8.5x. High-growth businesses can exceed 10x, whereas declining operators often fall to 2–4x.
This underscores the importance of credible growth forecasts in valuation.
Get in touch
FRP’s valuations specialists bring a wealth of experience across the construction and housebuilding sectors.
Jim, a Partner since 2021, has advised on complex valuation matters for over 15 years, with experience spanning transactions, disputes, and restructuring across global markets.
Tom, who joined as a Director in 2024, specialises in valuation support for equity raises, reorganisations, and tax planning, with a strong track record in financial services and infrastructure.
Together, they offer rigorous, independent insight to help operators, investors, and boards navigate value with confidence.
