A number of value investors have been taking an interest in UK stocks recently. And housebuilders in particular have been catching the eye of international fund managers.
One example is Bellway (LSE:BWY). The stock is trading at a price-to-book (P/B) ratio below 1, but a look at the company’s track record actually paints quite an impressive picture.
UK housebuilding
The UK’s long-term shortage of housing is well-documented. And within this promising market, Bellway occupies an interesting position.
Its average selling price is between Persimmon and Barratt Redrow. This puts it in a position to appeal to both premium buyers trading down in a crisis or people trading up in a booming market.
The company also has an outstanding reputation for quality. It’s maintained a 5-star rating from the Home Builders Federation for almost a decade, and was the Large Housebuilder of the Year in 2025.
In short, Bellway offers customers high-quality properties and relatively reasonable prices. And whether it’s the stock market or the housing market, that’s an attractive combination.
Growth
Bellway’s share price has gone nowhere in the last 10 years, but investors should look at the business. Revenue growth has been slow, but the firm’s book value has increased much faster.
In 2015, the difference between the company’s assets and its liabilities was £1.5bn. Fast forward to 2025 and the gap has more than doubled to £3.6bn, despite the stagnant share price.
One reason for this is the firm’s approach to its balance sheet. Bellway has traditionally been more resilient than other housebuilders in downturns, but this comes at the cost of revenue growth.
That might not be a bad thing over the long term. But there is another reason for the difference between sales growth and book value growth that’s a bit more concerning.
Assets
Like a lot of housebuilders, the majority of Bellway’s assets are inventory – these are essentially its land bank and its work in progress. And this is something investors need to be aware of.
Rising inventory levels can be a good thing. Houses aren’t built overnight, so companies need to have properties ready to go if demand suddenly picks up – and this is what inventory provides.
There is, however, also a risk. It can be a sign that properties aren’t selling and having capital tied up in stock limits a company’s ability to invest in growth or return cash to shareholders.
Bellway’s strong reputation for managing its balance sheet might mean it earns the benefit of the doubt. But high inventory levels do make a weak housing market more of a problem.
A gift for value investors?
There are obvious reasons to be interested in the UK housing sector at the moment. And Bellway has a well-earned reputation for growing its book value while managing its risks carefully.
Despite this, I think investors need to tread carefully. Rising inventories represent potential future growth, but it needs the market to be strong enough to convert that into cash.
That’s why my pick for the industry is Vistry Group. A focus on partnerships with housing providers, rather than open market sales, helps limit the build-up of excess inventory, which is why it’s the stock I’m buying.
