Crest Nicholson slashes profit forecast as market slowdown hits housebuilder

Crest Nicholson has downgraded its annual earnings forecast following a significant slowdown in the UK housing market over the summer.

The Surrey-based housebuilder now expects to report an adjusted pre-tax profit of £50million this year, down from previous estimates of £73.7million.

Britain’s property construction industry has been badly affected by a decline in new-build completions in 2023, due in considerable part to interest rate hikes driving up mortgage costs. 

Trade has been further impacted by labour shortages, higher building material costs and the recent end of the Help to Buy equity loan scheme, which had accounted for a major share of the sector’s sales.

Though house prices have remained robust, Crest told shareholders that sales volumes had softened, ‘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 18 August was half this volume.

Given that the Bank of England is predicted to make further base rate hikes, Crest does not forecast ‘a material improvement in trading conditions’ before the end of the financial year in late October.

In response, the firm expects to reduce land purchase activity, merge the East Anglia operations into its Eastern division and lower its ‘overhead position’. 

Crest would not confirm to This is Money whether this would include job cuts.

Crest Nicholson shares plunged 9.1 per cent to 176.3p on Monday morning, making them the biggest faller on the FTSE 250 Index.

Shares in other large housebuilders responded negatively, with Taylor Wimpey, Persimmon and Vistry Group all declining by at least 2.5 per cent in early trading.

Charlie Huggins, the 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 any time soon.’

Rightmove also released figures on Monday showing that asking prices for UK homes fell by an average of £7,012 to £364,895 in August, the biggest drop for that month in five years.

Meanwhile, the volume of agreed sales was 15 per cent below pre-pandemic levels ‘as higher mortgage rates mean that some have had to pause their moving plans for now,’ said the property portal.

Britain’s largest lenders, including NatWest and Nationwide, have recently started cutting rates on fixed mortgage deals, providing much-needed relief for many homeowners.

But they remain far above their levels in recent years and are likely to go back up again if the central bank continues upping its base rate.

Many analysts warned this would likely happen after figures released last week by the Office for National Statistics showed regular pay in the UK increased by 7.8 per cent between April and June.