British housebuilder Crest Nicholson plunged into the red and cut its dividend, highlighting problems in Britain’s property sector.
The FTSE 250 company warned for the fourth time in a year that profits would fall short of expectations and said it continued to be weighed down by volatile mortgage rates and slowing demand in the housing market.
Crest posted a pre-tax loss of £30.9m for the six months to the end of April, down from £28.4m in the same period a year earlier.
Home completions fell 12% in six months compared to a year earlier. It now expects to make adjusted pre-tax profits of between £22m and £29m for the full financial year, below analysts’ estimates of almost £39m. Shares fell 8% in early trading on Thursday.
The housebuilder said momentum had “moderated somewhat” since April, reflecting market expectations that interest rate cuts would come much later in the year than originally expected. She said the general election also “creates some short-term uncertainty”.
Crest is taking a one-off charge of £31.4m – almost double the previous estimate of £15m – after it completed a review of the cost of repairing defects in buildings at four of its sites. It cut its interim dividend by more than 80% to 1p.
The housebuilder said economic uncertainty following the September 2022 mini-budget continued to weigh on the housing market.
“While mortgage rates have been stable over the period, there has been little impetus for consumers to enter the market, with many consumers waiting for rate cuts,” the company said, adding that planning matters continue to take longer to get going.
The results from housebuilders are the latest sign that confidence in the UK housing market is starting to wane as markets increasingly bet on interest rate cuts later in the year.
City traders expect the Bank of England to delay cutting borrowing costs from 5.25% when politicians meet next week. Earlier this year, financial markets expected four quarter-percent rate cuts, but now expect two at most, with the first not until late summer or early fall.
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A study by the Royal Institution of Chartered Surveyors (Rics) published on Thursday found that a net 8% of property professionals said demand from home buyers fell rather than rose in May, the weakest reading since November 2023. Buyer demand was the weakest in May. south-east and south-west England, the report said.
But demand continues to outstrip supply in the private rented sector, leaving tenants facing rising living costs and falling levels of affordability, Rics said. A net balance of 35% of experts said that tenant demand has increased rather than decreased.
Virgin Money reported strong profit growth on Thursday, boosted by higher interest rates. The lender, which is the subject of a proposed £2.9bn takeover by building society Nationwide, reported a rise in pre-tax profit to £279m in the six months to the end of March from £236m a year earlier. However, it said that in the mortgage division, balances fell by 2% to £56.6bn in the first half, reflecting a subdued market for completions.