Rightmove: Housebuilders face worst conditions since financial crisis
The boss of property portal Rightmove has warned that UK housebuilders are facing the worst conditions since the 2008 financial crash.
Johan Svanstrom, the FTSE 250 firm’s chief executive, said on Friday that new home developments are at “historically low levels due to continued softer build rates”.
The property platform said growth in its new homes business was “subdued” because of a six per cent drop-off in new-build developments compared to a year ago.
“Developers are seeing conditions among the most difficult experienced since the global financial crisis and, as a result, new developments coming to market are at their lowest in over a decade,” Svanstrom said.
The FTSE 250 firm’s pre-tax profit inched up by two per cent to £149m in the six months to June. Its shares gained two per cent to 466p on Friday.
Taylor Wimpey: ‘Prolonged downturn’
Also on Friday, housebuilder Taylor Wimpey slashed its dividend and warned of a “prolonged market downturn” as it warned the crunch facing UK housebuilders shows no signs of letting up.
The FTSE-250-listed builder said on Friday that it is shoring up its books to focus on cash generation and margin control amid a “backdrop of continuing market uncertainty”.
This was the latest gloomy update in a tortuous few months for the nation’s housebuilders, who have battled with rising building costs, hikes to mortgage rates and falling consumer confidence since the Iran war broke out at the end of February.
Taylor Wimpey said that it will cut its shareholder dividend from 7.5 per cent of net assets to four per cent. It narrowed its home completion target from between 10,600 and 11,000 to between 10,600 and 10,800 to reflect lower-than-expected sales in the first six months of the year.
“The housing market downturn has proved more prolonged than anticipated, with affordability pressures continuing to affect demand and profitability expectations remaining lower than when the current distribution level was set,” the company said.
Housing sector ‘on shaky foundations’
The housebuilder’s private sales rate fell from 0.59 to 0.55 year on year and its net order book stands at £2m, a nine per cent drop from the year before.
Taylor Wimpey said it supported the government’s “housing ambition” but called on Prime Minister Andy Burnham to take measures to boost demand for new housing.
“Without targeted demand support and viability measures to unlock delivery, weaker demand, rising costs and limited affordable housing funding risks reducing sector output and UK economic growth,” the firm told investors.
The firm’s shares slipped more than four per cent to 79p in early trading. Taylor Wimpey’s update offered the “latest reminder that this sector is on shaky foundations,” said Russ Mould, AJ Bell’s investment director.
On Thursday, London-based builders’ merchant Lord’s Group warned that the construction industry is suffering from rising employment costs and falling consumer confidence.