Copy article

More Doom and Gloom for the Housbuilding Sector ?

Journalist: Newsteam, Newsteam

ended 13. September 2023

Redrow PLC (LSE:RDW) plans to slash the dividend as it predicted profits could halve in the coming financial year as rising mortgage rates take their toll on the housing market.

The housebuilder forecast revenue in the new financial year of £1.65-1.7 billion, pre-tax profit of £180-200 million and a dividend of 14p per share.

The firm said it was basing this guidance on a sales rate in line with financial year 2023 of 0.46 per outlet per week.

Redrow said the sales market over the summer has been “challenging,” which resulted in sales per outlet per week for the first 10 weeks of the new financial year of 0.34, down from 0.61 the year before.

Matthew Pratt, chief executive said: “Cost of living and mortgage affordability continue to have a negative impact on the market.”

The news came as the FTSE 250-listed firm reported results for the year to July 2, 2023.

Revenue was flat at £2.13 billion compared to £2.14 billion the year before, while pre-tax profit rose £395 million from £246 million.

  • Are NEW Build Mortgage inquiries grinding to a halt?
  • How long before the market comes back to some normality?
  • What can the Government do to kick-start this market, or is this part of their agenda to slow the market?

 

4 responses from the Newspage community

Copy all

Star Quote
Copy

Editor
Darryl Dhoffer
Founder at The Mortgage Geezer
NEW Build mortgage inquiries have fallen off a cliff over recent months. The feedback has been: overpriced properties, mortgage affordability issues, delays in construction and no support schemes to help advance a purchase.
All too familiar story at present.
Copy

Graham Cox
Director at Bridging Hub
New build properties are expensive, and a bit like driving a new car off a dealer's forecourt, tend to lose some value in the first two years. In good times, a rising tide floats all boats, so the drop in value is masked by house prices rising generally. Of course, that's no longer the case.

Whilst I wouldn't want to see a return of Help to Buy, which more accurately should be called Help to Sell, we do need housebuilders to keep building. Whether they can do so profitably if house prices fall another 10 or 15% remains to be seen.
Copy

Rhys Schofield
Brand Director at Peak Mortgages and Protection
The simplest way to uncork the pent-up demand for people to move house? A targeted stamp duty holiday targeted at people looking to downsize. Too many people are rattling round in houses with spare bedrooms or with a mortgage payment that is now uncomfortable - incentivising them to move could well boost overall transactions and even increase overall takings from stamp duty for the chancellor.
Copy

Charles Breen
Founder at C B
Builders are grappling with rising construction costs, declining house prices, and reduced demand following the discontinuation of Help to Buy. Notably, Redrow is among those adjusting to these challenges. The government's decision to let Help to Buy expire without introducing an alternative scheme for low-income individuals has been widely criticized, as it has significantly impacted both the construction and sale of houses, thereby affecting builders' financial performance. Predictably, Zoopla's data reveals that many people are choosing to stay put and weather the economic uncertainty, leading to a decrease in demand for new homes. Consequently, builders are slowing down their production, and prospective homebuyers are becoming more hesitant due to higher market mortgage rates.