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Redrow blames market turmoil for falling sales as developer halves land purchases amid economic uncertainty
- Net private bookings down 19% to £515m in last four months
- Redrow bought just 724 new plots of land – half of the 1,495 acquired last year
- Turnover in 2023 will be £2.1bn, the same as last year but lower than the £2.3bn forecast
Redrow has blamed the recent turmoil in financial markets fueled by the mini-budget for a sharp drop in sales of its new-build homes, which has lowered its earnings outlook.
Another sign that the property market is cooling, the FTSE 250 developer said net private reservations have fallen 19 percent in the past four months to £515 million compared to the same period a year ago.
While it still benefited from rising house prices – with an average sale price of 6.9 per cent to £483,000 – Redrow was cautious about the future.
Redrow has seen sales of its new-build homes fall by almost a fifth in recent weeks
It said it had bought only 724 new plots – half of the 1,495 acquired last year – as it remained “selective” amid economic uncertainty.
The total order book for forward orders stood at £1.36 billion as of November 6, down nearly 9 percent from last year’s £1.49 billion.
Ahead of today’s annual general meeting, chairman Richard Akers told investors that the housing market had returned to “normal” after the boom experienced during the pandemic.
“However, recent instability in the financial markets has negatively impacted the housing market and the company has had to adapt to the changing economic outlook,” he added.
The company now expects revenues to be around £2.1bn by 2023, in line with the previous year, but lower than its previous forecast of £2.3bn to £2.4bn.
Despite the lowered forecasts, Redrow Shares rose 0.4 percent to 473.80p in morning trading on Friday.
Home builders have benefited from soaring house prices and government support measures during the pandemic.
But in recent weeks, they have signaled declining demand for real estate as the cost of living crisis and rising mortgage rates hit the market hard.
Mortgage rates rose to more than 6 percent after the much criticized mini budget of former Chancellor Kwasi Kwarteng in September.
This week, fellow developer Taylor Wimpey reported that 24 percent of home purchases were canceled in the second half of the fiscal year — up from 14 percent in 2021 — as the economic environment deteriorates.
Last month, Barratt, the UK’s largest homebuilder, issued a profit warning after a plunge in reservations.
Home prices have already started to fall and brokers across the country reported a downturn in October, according to the latest RICS survey.
On balance, respondents in all parts of the UK now believe that prices will fall somewhat in the coming year.