Crest Nicholson cuts earnings forecast as market slowdown hits homebuilder
- Crest Nicholson now expects to report an adjusted £50m pre-tax profit this year
- The real estate construction sector in Great Britain has been seriously affected by the rise in interest rates
- Commerce has been further affected by the end of the Help to Buy loan program
Crest Nicholson has lowered its full-year earnings forecast following the significant slowdown in the UK property market over the summer.
The Surrey-based homebuilder now expects to report an adjusted £50m pre-tax profit this year, down from earlier estimates of £73.7m.
Britain’s property construction industry has been hit hard by a decline in new build completions in 2023, due in large part to interest rate hikes driving up mortgage costs.
Challenges: Britain’s property construction industry has been hit hard through 2023 by a decline in new build completions due largely to interest rate hikes
The trade has been further affected by labor shortages, rising construction material costs and the recent termination of the Help to Buy capital loan programme, which accounted for a significant portion of industry sales. .
Although home prices have remained strong, Crest told shareholders that sales volumes have weakened, “particularly in recent weeks.”
Having anticipated two months ago that its outlets would sell 0.5 homes on average per week, the company said the actual figure for the seven weeks ending August 18 was half this volume.
With the Bank of England expected to make further base rate increases, Crest does not forecast “a substantial improvement in business conditions” before the end of the fiscal year at the end of October.
In response, the company hopes to reduce land-buying activity, merge East Anglia operations into its Eastern division and reduce its ‘overall position’.
Crest did not confirm to This is Money if this would include job cuts.
Crest Nicholson Stock it plunged 9.1 percent to 176.3 pence on Monday morning, making it the biggest drop in the FTSE 250 index.
Shares of other big homebuilders responded negatively, with Taylor Wimpey, Persimmon and Vistry Group falling at least 2.5 percent in early trading.
Charlie Huggins, head of equities at investment service Wealth Club, said: ‘The housing market is on very shaky foundations.
‘Although inflation appears to be moderating, the Bank of England is expected to tighten the screw further in the coming months. As such, it seems unlikely that trading conditions for Crest Nicholson or its peers will improve anytime soon.’
Rightmove also released figures on Monday showing UK home sales prices fell by an average of £7,012 to £364,895 in August, the biggest drop for that month in five years.
Meanwhile, agreed sales volume was 15 percent below pre-pandemic levels “as higher mortgage rates mean some have had to put their move plans on hold for now,” the property portal said.
Britain’s biggest lenders, including NatWest and Nationwide, have recently started cutting rates on fixed mortgage deals, providing much-needed relief for many homeowners.
But they are still well above their levels in recent years and are likely to rise again if the central bank continues to raise its base rate.
Many analysts warned this was likely to happen after figures released last week by the Office for National Statistics showed UK regular wages rose 7.8 percent between April and June.
