LONDON (ShareCast) - Housebuilding shares have fallen far enough for UBS to declare the stocks oversold.

UBS analyst Mark Stockdale said current share prices factor in “overly bearish cuts to net tangible assets and do not reflect that sector debt should be cut by £3.1bn between 2007 and 2009.”

Slashed dividends and a moratorium on land purchases will enable the companies to direct cash-flow towards the reduction of debt, Stockdale said, adding that most housebuilders will “effectively be working for the banks through to 2010”.

"Given the collapse of share prices since April, our cash flow/net tangible asset model makes it hard to maintain sell ratings, particularly as covenants are being re-written,” Stockdale said.

The broker has upgraded its stance on Bellway, Redrow and Persimmon, moving them to “neutral” from “sell”, reversing downgrades made at the beginning of June.

Barratt Developments, Bovis Homes and Taylor Wimpey have been left at neutral, while Berkeley Group is the only stock in the sector the broker would consider buying.

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