MJ Gleeson’s ‘affordable’ homes lure new customers amid cost of living crisis
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MJ Gleeson’s earnings beat forecasts as demand for ‘affordable’ homes outpaces first-time buyers due to cost of living tightness
- Housebuilder says it sees interest from ‘value-driven’ customers
- Average selling price is up 15% over the past year to £167,300
- Pre-tax profit for the year to June increased by 33%
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MJ Gleeson has posted bumper gains after demand for its “affordable” homes outpaced the first-time buyer demographic.
The company told investors Thursday that it is taking on more and more clients who would normally go for more expensive properties as they scale back their ambitions amid the cost of living.
While buyer demand has remained strong for the first time since the start of the new fiscal year in July, the homebuilder and land investor said it is beginning to see interest from “value-driven” customers.
Cheerful: MJ Gleeson said his affordable homes are getting more attractive during the crisis
The houses, which cost an average of £167,300, are 59 per cent cheaper than the geographic average selling price of £266,000, it said.
“We’re off to a good start to the current financial year,” James Thomson, CEO of MJ Gleeson, told investors.
‘Demand from first-time buyers, driven by the shortage of new homes, remains strong.
“In addition, the cost-of-living challenges for many home buyers mean that the affordability of our homes is driving additional interest from customers who may not have previously considered a Gleeson home.”
In the year to the end of June, the group sold 2,000 homes, almost 200 more than in 2021, at an average sales price of £167,300 – £21,500, or 15 per cent higher than the previous year.
This boosted sales by 26 percent to £334.6 million, with rising house prices more than offsetting the rise in material and labor costs.
Annual pre-tax profit rose by a third to £55.5 million, beating forecasts of £53 million.
The group chose to increase the dividend by 20 percent to 18p.
Thomson said the group is well positioned to grow profits in the current fiscal year thanks to the supply of affordable housing at a time when budgets are under pressure.
Even taking into account future increases in borrowing costs, ‘cost of living’ […] will further enhance the attractiveness of a Gleeson home,” he added.
Strong demand for new buyers, driven by the acute shortage of new homes, is expected to continue, albeit with a more modest rise in house prices widely expected in the near term.
Crucially, the affordability of our homes will help mitigate the impact of both inflationary pressures and higher interest rates on first-time buyers and movers, which will continue to boost demand.”
MJ Gleeson shares rose 5.6 percent to 490p in afternoon trading Thursday.
The upbeat tone of MJ Gleeson’s update contrasts with the more cautious comments from rival homebuilders this month.
While all property developers have reported strong gains from rising house prices, they also warned of a slowdown in demand.
Yesterday, Redrow said the property market “cooled down” to normal levels after two strong years, while Barratt boss David Thomas said current trading was “more challenging” in July and August.