UK housebuilder Crest Nicholson has reported robust trading in its main markets as it revealed a 12% jump in the price of its homes. In the six months to April 30, 2017 the average selling price of the company’s homes reached £418,000. This comes at a time when many investors and experts are expressing concern about the state of the UK housing market. So, what else did Crest Nicholson reveal in this week’s trading statement?
Sales targets on track
The company recently set a sales target of £1.4 billion per annum by 2019 and with full year revenues for this year set to increase by 10% the company is “firmly on track”. The focus on high-value homes and relatively wealthy locations saw a slight drop in sales per site falling from 0.9 to 0.8. There has also been a dip in first half completions falling from 1206 down to 1064 over the last 12 months. The company suggested this was mainly because of timing issues regarding the construction of private rental property.
It was also interesting to see comments regarding the mortgage market with Crest Nicholson suggesting access to finance is not a problem for buyers. The government’s Help to Buy scheme has also proved to be extremely useful for the company allowing buyers to purchase new properties with deposits as low as 5%. The scheme is due to end in 2019 but all political parties seem fully aware of the housing shortage in the UK and there is every chance this financial assistance will be extended.
Shortage of newbuilds
Stephen Stone, the chief executive of Crest Nicholson, gave us an intriguing insight into the markets suggesting that if the government was to stop the Help to Buy scheme in 2019 this would reduce the number of newbuilds in the UK by between 5% and 10% per annum. In many ways this perfectly illustrates the UK housing market at the moment. As a consequence, with the number of newbuilds already running tens of thousands behind even the minimal requirement rate, does the UK government have any real option but to extend financial assistance?
If we look at the rhetoric coming from political parties as we move towards 8 June, and voting in the next general election, the indications are that further finance for the UK housing market will be available. However, history shows us that what politicians promise in the run-up to a general election do not always materialise after the electorate has voted!
Mixed signals
While the likes of Halifax and the Land Registry have reported a slight dip in UK property prices the likes of Crest Nicholson are not feeling any pain during their everyday activities. If, as many people have predicted, we were to see a significant fall in UK property prices surely the more lucrative end of the market in which Crest Nicholson operates would be one of the first to feel the pinch?
Whether or not the UK government is offering artificial support to the UK housing market via the Help to Buy scheme is debatable. However, it is obvious that buyers are becoming more and more dependent upon government assistance which is helping to grow sales for companies such as Crest Nicholson. Can the authorities really afford to withdraw much-needed financial assistance in the short to medium term?