MJ Gleeson home sales plummet amid rising interest rates

MJ Gleeson has not escaped the real estate industry’s troubles, with the low-cost homebuilder reporting a slump in home sales.

The construction company, which built Sheffield’s Crucible Theater, revealed it sold 1,723 homes for the 12 months ended June, compared to 2,000 the previous year.

Demand for mortgages has fallen over the past year due to the Bank of England raising interest rates 13 consecutive times to dry up and dampen inflation levels, mainly caused by rising food and energy prices.

Analysts have also blamed former Prime Minister Liz Truss’s controversial mini-budget last September for seriously damaging homebuyers’ confidence.

An average two-year fixed-rate mortgage now has an interest rate of 6.5 percent, while a five-year contract is 6.04 percent, according to data provider Moneyfacts.

Despite this, MJ Gleeson told shareholders his properties were becoming ‘increasingly attractive’ to Britons who would previously have made a more expensive purchase.

For the second half of the reporting period, reservations by location fell to 0.64 per week.

At the same time, the group saw a “significant shift” in its customer demographic, with the share of open market reservations by new buyers dropping from 71 percent to about half.

By contrast, the share of sales to over-55s, who are more likely to be homeowners, doubled from 10 to 20 percent.

It also noted that the average sale price of one of its properties increased by 11.3 per cent over the year to £186,200, more than offsetting additional labor and building material costs.

Graham Prothero, chief executive of MJ Gleeson, said: ‘We are pleased with the performance for the year in a challenging economic environment.

“We took advantage of the calmer market to restructure Gleeson Homes, putting the company in great shape to grow as the market recovers.”

However, house prices in the UK are now falling after a prolonged period of expansion due to a shortage of new developments, low interest rates and a temporary stamp duty holiday introduced in the summer of 2020.

Figures published on Friday by well-known lender Halifax showed that the country’s property prices experienced their biggest annual decline in 12 years in June, falling 2.6 per cent to an average of £285,932.

They are likely to fall even further if the Bank of England raises rates again, which seems very likely given that the current UK inflation rate of 8.7% is more than four times the central bank’s target rate of 2%.

MJ Gleeson Stocks were 2.1 percent lower at 377p late Friday afternoon and have shrunk by about a quarter over the past 12 months.