The UK housebuilding sector will be swept by a further round of consolidation, according to stockbroker Old Mutual Securities.
In a note on the sector, the broker said a tranche of mid-sized housebuilders would be likely to succumb to mergers or acquisitions.

Old Mutual said six firms that each had a market capitalisation of less than £500m, and that built less than 6000 homes a year were favourites. These are Bellway, Bovis, Crest Nicholson, Redrow, Westbury and Wilson Connolly.

The broker added that bigger groups, such as Persimmon and Wimpey, that had already bought rivals could make more purchases. The note said: "The firms that have already consolidated have signified no intention to sit tight."

The note said the UK market was following the USA, which consolidated in the late 1990s, creating a few extra-large firms that built up to 25,000 homes a year. This led to a re-rating of the sector by the Dow Jones.

The note said: "These enlarged groups are on higher price-earnings multiples than the smaller ones.

If we apply the same logic to the UK, consolidation should differentiate the builders – the larger, quality players will create greater shareholder interest, which in turn should enhance valuations."

The note came as speculation resurfaced that Laing Homes would soon be put up for sale. Reports claimed that Bellway and Westbury had approached Laing to buy the arm for £300m.