Crest Nicholson, a British housebuilder, has revised its annual profit forecast downwards, resulting in shares reaching a near three-year low. This move follows a trend among other British housebuilders who have also highlighted weakening conditions in the housing sector. The industry is experiencing a significant slowdown due to high interest rates, which have led to an increase in mortgage rates. As a result, prospective homebuyers are facing financial constraints.
Crest Nicholson, a midcap firm listed on the FTSE, has reported a decline in transaction levels across the industry in recent weeks. The company does not anticipate a substantial improvement in trading for the current financial year, which ends in October. The news caused Crest Nicholson shares to drop by approximately 14% initially, before recovering slightly to a 7% decline. This decline is in line with the sharp fall in asking prices for homes in Britain this month, triggered by rising mortgage costs.
Other housebuilders, including Barratt, Persimmon, and Taylor Wimpey, also experienced a drop in their share prices. Crest Nicholson, which had already reported a more than 60% decrease in half-year profit in June, stated that weekly sales per outlet for the seven weeks leading up to mid-August had fallen significantly compared to previous forecasts.
AJ Bell investment director Russ Mould commented on Crest Nicholson’s warning, stating, “The scale of Crest Nicholson’s warning may come as a shock to investors given it reported its first-half results just a couple of months ago, and this hints at the speed and scale of the deterioration in the market.” The company now expects its full-year adjusted profit before tax to be around £50m (€58.5m).
Crest Nicholson’s rival, Bellway, has also indicated that new home sales will decrease significantly. Barratt, on the other hand, has announced plans to build around 20% fewer homes in 2024. The sell-off of British housebuilder shares has had a significant impact on the FTSE index that tracks the homebuilders, causing a sharp decline. Since the beginning of last year, the index has dropped by over 40% due to concerns about the mortgage market, driven by a surge in interest rates and a weakening British economy.
It is evident that the housing sector in Britain is currently facing challenging conditions, with Crest Nicholson’s profit downgrade being the latest indicator of the industry’s struggles.