Redrow blames market turmoil as the cause of falling sales as developer slashes land purchases amid economic uncertainty
- Net private bookings down 19% over the last four months to £515 million
- Redrow bought just 724 new lots – half of the 1,495 acquired last year
- Revenue for 2023 will be £2.1bn, same as last year but lower than expected £2.3bn
Redrow has blamed the recent mini-budget financial market turmoil on a sharp downturn in sales of its new-build homes, forcing it to lower its revenue outlook.
In a further sign that the property market is cooling, the FTSE 250 developer said net private bookings fell 19 percent over the past four months to £515 million compared to the same period a year ago.
While it still benefited from rising house prices – with the average sale price rising 6.9 per cent to £483,000 – Redrow was cautious about the future.
Redrow saw sales of its new-build homes fall by nearly 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” due to economic uncertainty.
The total forward order book stood at £1.36 billion on 6 November, nearly 9 per cent less than 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 booming during the pandemic.
“However, recent financial market instability has had a negative impact on the housing market and the company has had to adapt to the changing economic outlook,” he added.
The company now expects revenue for 2023 to be around £2.1bn, in line with the previous year but lower than its previous guidance of £2.3bn to £2.4bn.
Despite the lowered forecasts, Redrow Shares rose 0.4 percent to 473.80p in morning trading on Friday.
Homebuilders have benefited from rapidly rising house prices and government support measures during the pandemic.
But in recent weeks, they have noticed falling demand for real estate as the cost of living crisis and rising mortgage rates hit the market hard.
Mortgage rates shot up above 6 percent after former Chancellor Kwasi Kwarteng’s widely criticized mini-budget in September.
This week, fellow developer Taylor Wimpey reported that 24 percent of home purchases in the second half of the fiscal year were canceled — up from 14 percent in 2021 — as the economic climate deteriorates.
Last month Barratt, the UK’s largest homebuilder, issued a profit warning after a dive in reservations.
House prices have already started to fall, according to the latest RICS survey, with realtors across the country reporting a downturn in October.
Respondents in all parts of the UK now believe, on balance, that prices will fall somewhat in the coming year.