British housebuilder Crest Nicholson has plunged into the red and cut its dividend, highlighting the problems in the British property sector.
The FTSE 250 company warned for the fourth time in a year that profits would be below expectations and said it was still hurt by volatile mortgage rates and slowing demand in the housing market.
Crest reported a pre-tax loss of £30.9 million in the six months to the end of April, compared with a loss of £28.4 million in the same period a year earlier.
The number of completed homes fell by 12% in six months compared to a year earlier. The company now expects adjusted pre-tax profits of £22m to £29m for the full financial year, below analyst expectations of almost £39m. Shares fell 8% in early trading on Thursday.
The housebuilder said momentum has “weakened slightly” since April, reflecting market expectations that rate cuts will come much later in the year than previously expected. It said the general election also “created some near-term uncertainty”.
Crest will take a one-off charge of £31.4m – almost double its previous estimate of £15m – after completing an investigation into the costs of fixing construction defects at four of its sites. It cut its interim dividend by more than 80% to 1p.
The housebuilder said the economic uncertainty that followed the mini-budget in September 2022 continued to impact the housing market.
“Although mortgage rates have remained stable over the period, there has been little incentive for consumers to enter the market, with many consumers waiting for a rate cut,” the company said, adding that planning matters are also taking longer to complete keep waiting.
The housebuilder’s results are the latest indication that confidence in the UK housing market is starting to waver as markets increasingly bet on rate cuts later this year.
City traders expect the Bank of England will hold off on cutting borrowing costs from 5.25% when policymakers meet next week. Earlier this year, financial markets expected a rate cut of four quarter points, but now they expect at most two, with the first not happening until late summer or early fall.
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A survey published on Thursday by the Royal Institution of Chartered Surveyors (Rics) shows that a net 8% of property professionals say homebuyer demand fell rather than rose in May, marking the weakest reading since November 2023. southeast and southwest England, the report said.
However, demand continues to outstrip supply in the private rental sector, leaving tenants facing rising costs of living and falling affordability levels, Rics said. A net 35% of professionals said tenant demand increased rather than decreased.
On Thursday, Virgin Money reported strong profit growth, supported by the impact of higher interest rates. The lender, which is the subject of a proposed £2.9 billion takeover by construction company Nationwide, reported a rise in pre-tax profits to £279 million in the six months to the end of March, up from £236 million a year earlier . However, it says balances in its mortgage division fell 2% to £56.6bn in the first half, reflecting a subdued completions market.