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Tuesday 20 August 2019

Barratt and Crest Nicholson insist demand remains strong despite London woes

The building giants said the “wide availability” of mortgage finance and the Government’s Help to Buy scheme were helping support demand.

House building
House building

By Holly Williams, Press Association Deputy City Editor

Housebuilders Barratt Developments and Crest Nicholson have become the latest firms to shrug off property market fears as they insisted buyer demand remains strong despite signs of a flagging London market.

The building giants said the “wide availability” of mortgage finance was helping support the new-build market in the face of Brexit uncertainty and a squeeze on household finances.

But shares in the pair slipped as investors remained unconvinced, with Crest’s stock down 6% as it said central London was seeing sales slow and prices weaken.

Housing Construction – Stock

Barratt – the UK’s largest housebuilder – said it had seen a “strong start” to its financial year, having held its sales rate firm at 0.74 reservations per development a week and with forward sales up 8.4% at £2.9 billion.

It said: “Market conditions remain good, and the group has delivered a strong performance since the start of the financial year, with customer demand for new homes supported by wide availability of attractive mortgage finance.”

Boss David Thomas said the group remains “confident in delivering a good performance” over the full year, although it expects “modest” growth in wholly-owned completions.

In its full-year trading update, Crest said the housing market was “generally” robust, in the spite of a slight slowdown in London.

Its underlying sales rates for the year eased to 0.77 sales per development each week from 0.81 the previous year as a result of higher selling prices and the softer market in central London.

But its figures showed a solid overall performance is expected for the year to October 31, which has continued so far since then, with forward sales for completions up 14.8% at £265.3 million.

The group said: “Whilst there may be some impact from current economic and political uncertainty, high levels of employment and low interest rates, combined with good mortgage access and the Help to Buy Scheme, underpin demand for new-build housing and continue to help many purchasers into new homes.”

Crest said open-market prices rose by 5.4% over the year to October 31 to £391,000, while it completed 2,935 homes – up 2.3% on the previous year.

The price rise was sharply lower than the 18% jump seen in the previous year, when prices were boosted by its efforts to switch to higher value properties and locations – a shift that is now largely complete.

It expects revenues to be higher across the board, with sales for the year to be around 6% to 7% higher.

Analysts at Peel Hunt cut their full-year outlook for Crest in spite of the robust demand and sales rates.

But they said: “Our revised forecasts point to double-digit profit increases over the next two years and we still believe the shares look good value.”

The figures follow an upbeat outlook on trading from rival Bovis on Tuesday amid contrasting views on the market from the major players.

Updates from Persimmon and Redrow last week sparked fears of a slowdown, coming hot on the heels of a survey from the Royal Institution of Chartered Surveyors showing house sales were flat or falling across large swathes of the UK.

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