- Firms report sharp drop in reservations
- Both decide to scale back their growth plans
- First-time buyers pausing purchases
The most recent trading updates from two of the UK’s smaller listed house builders, Crest Nicholson (CRST) and Redrow (RDW), reinforce the message from the larger firms that homebuyer interest has waned significantly in the weeks since the calamitous ‘mini-budget’ in September.
Both companies have seen a fall-off in private reservations and have begun reining in their ambitions due to the rising economic uncertainty.
SLOWER SALES IMPACTING GROWTH PLANS
Surrey-based Crest Nicholson, which last year completed 2,400 new homes, said in June said it had sales per outlet per week of 0.72 and a forward order book of 2,891 units.
Now the firm says sales per outlet per week have dropped to 0.55 in the past 18 weeks with trading weaker still in recent weeks, and forward sales are 2,038 units.
Having given the green light to new developments in Yorkshire and East Anglia, the company says given the uncertain outlook ‘we believe it is the right decision to defer the planned opening of a third new division and adjust the pace of growth in our existing ones until a more stable environment returns’.
Meanwhile, Flintshire-based Redrow, which completed 5,715 homes in the year to July, said last week private reservations in the last 18 weeks had fallen to 0.49 compared with 0.68 last year.
Having ‘returned to normal’ after the unusually high sales rate of the last few years, the firm said recent instability in financial markets has had ‘a negative impact on the housing market and the business has had to adapt to the changing economic outlook’.
Redrow’s response has been to slow its rate of land buying, with just 724 plots added to its land bank compared with more than double that number last year.
FIRST-TIME BUYERS STEPPING BACK
Recent house price surveys point to a clear cooling in the market with property portal Rightmove (RMV) reporting a 1.1% decline in average asking prices this month.
Despite what it calls ‘the weight of financial uncertainty’, a drop of 1.1% is in line with the November average from 2015 to 2019 but the firm notes overall buyer demand is down 20% year-on-year with first-time buyer demand down 26% in the last month.
New buyers are holding off from committing themselves due to rising mortgage costs while others who were already ‘stretching themselves’ financially have had to pause or pull out of deals.
The company also notes the market has become more price-sensitive, with 8% of unsold properties being reduced compared with 4% last November as sellers try to land a buyer before the Christmas break.
