With mortgage curiosity rates rising to 15-year highs final month, and with probably the most drastic influence being felt by first-time buyers , demand for brand new builds has plummeted. Rates have fallen again in current weeks with main lenders chopping their prices on a number of events, however nonetheless stay a lot greater than they’d been earlier than the worldwide monetary disaster.
The housebuilder, with a variety of websites within the London commuter belt, mentioned: “Against a backdrop of persistently high inflation and rising interest rates, trading conditions for the housing market have worsened during the summer of this year.”
Having beforehand anticipated a profit of £73.7 million in June, the group now initiatives earnings to come back to only £50 million.
Analysis from S&P Global earlier this 12 months warned that housebuilding was falling at charges beforehand solely seen in the course of the Covid-19 pandemic and world monetary disaster, a decline that’s more likely to exacerbate housing shortages.
But whereas constructing has fallen off dramatically, house prices have nonetheless proved surprisingly resilient. Statistics from Rightmove this morning confirmed that costs this month dipped by solely 0.1% year-on-year in August, persevering with to defy forecasts of a property crash. However, issues had been completely different for first-time patrons, who’ve seen probably the most dramatic rate of interest rises, with home costs for these hoping to get on the property ladder falling by 1%.
“While pricing has remained resilient in a market with limited supply and few distressed sellers, the economic uncertainty is deterring prospective home movers,” Crest Nicholson mentioned.
“Additional mortgage borrowing for those looking to upgrade or for those with low levels of equity, notably first-time buyers, has become significantly more expensive with no Government support (following the end of Help to Buy) now in place to cushion this impact.”
However, it added: “The board remains positive and confident about the outlook for Crest Nicholson.
“While the current trading conditions are challenging, over the medium term it expects inflation to abate and mortgage rates start to reduce.
“In addition, the Group has a strong financial position and an experienced leadership team who are used to trading through downturns in the cycle. The long-term structural shortfall of housing supply versus demand continues to increase and the Group has developed an attractive land portfolio.”
Samuel Mather-Holgate, impartial monetary advisor at Mather and Murray Financial, famous that different housebuilders have additionally criticised Government housing coverage, however Crest has been the “most overt” thus far.
To make up for the decrease demand, Crest Nicholson has been negotiating bulk gross sales of its properties, that are sometimes agreed at decrease costs.
Despite the drop in anticipated earnings, Crest Nicholson nonetheless expects to difficulty a 17p dividend.
Shares are down 10.7% to 173.2p.
