High interest rates and a withdrawal of government support for first-time buyers will further weaken the UK housing market, according to a UK FTSE 250 housebuilder.
Crest Nicholson, which last year built and sold more than 2,500 homes, said the government should step in to support the housing market as it was “undoubtedly experiencing softer demand than the previous year”, in a statement to the stock market on Thursday.
On Wednesday, Halifax revealed the first fall in annual house prices in a decade. The housing industry is bracing for a slowdown after 12 consecutive interest rate increases by the Bank of England. The Bank is expected to raise rates further from 4.5% in the coming months as it tries to tame stubbornly high UK inflation.
Peter Truscott, the chief executive of Crest Nicholson, said higher mortgage rates coupled with the end of the government’s help-to-buy scheme in England was limiting the ability of potential first-time buyers to get on to the housing ladder.
He added: “If interest rates continue to rise, and remain elevated for a sustained period of time, this will undoubtedly exacerbate this issue even further and start to impact demand and confidence again. We continue to call on government to recognise this challenge and provide further support to these potential homeowners.”
Data from Halifax, one of the UK’s biggest lenders, showed the first annual fall in average house prices since December 2012. The Royal Institution of Chartered Surveyors on Thursday said “storm clouds” were gathering over the property market, despite a modest recovery in the sales activity during May.
On Thursday, Crest Nicholson reported a drop in sales for the six months to the end of April and a fall in revenue to £283m, down from £364m the year before. The builder completed 894 homes in the half-year, down from 1,096 the year before, and half-year profits dropped 59% to £22.1m. Its shares fell 7% on Thursday morning.
The company blamed the drop in sales squarely on the “economic uncertainty and lower confidence in the housing market” caused by the government’s disastrous “mini-budget” under the former prime minister Liz Truss and ex-chancellor Kwasi Kwarteng.
The mini-budget prompted banks to raise their mortgage rates abruptly and a freeze in transactions. The turmoil eventually calmed, but further interest rate increases are expected by economists.
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The government under Rishi Sunak is reportedly considering restarting help to buy in an effort to appeal to younger voters, despite the view of many property experts and economists that the scheme mainly served to inflate prices and support builders’ profits.
Crest Nicholson said it remained hopeful that “political solutions” could be deployed to improve the slow planning system and help affordability for first-time buyers, citing talks with the government.
