Homebuilder Crest Nicholson: Soaring house prices offsetting increasing energy costs and supply chain issues
- Crest Nicholson share have declined by over a fifth since the start of the year
- Its outlets sold an average 0.98 homes per week in the eight weeks to 21 March
- Demand for modern homes has accelerated since the end of the first lockdown
Housebuilder Crest Nicholson has said higher sales prices are helping to offset a hike in costs associated with Russia’s full-scale invasion of Ukraine.
The FTSE 250 firm told investors on Tuesday the escalating conflict had caused increasing input cost inflation through rising energy bills and greater disruption to the supply of raw materials.
These costs are expected to carry on growing, but bosses said they were optimistic about the company’s medium-term prospects due to the demand for new housing outpacing supply.
Prices: Crest Nicholson declared that the escalating conflict had caused increasing input cost inflation through rising energy bills and greater disruption to the supply of raw materials
They added that the group had a robust balance sheet, with net cash climbing by around £110million to more than £250million in the 2021 financial year, and was ‘progressing well’ with its expansion plans.
It comes as the Surrey-based business revealed that the rebound in home sales had continued to be strong, with its outlets selling an average of 0.98 properties per week in the eight weeks to 21 March.
This compared to 0.80 during the 12 months to 31 October and 0.59 in the year before that, while Crest Nicholson’s order book as of last Friday was also more than 84 per cent covered for 2022 fiscal year revenue.
Demand for modern properties has accelerated since the end of the first nationwide coronavirus lockdown in summer 2020 as Britons have looked for more spacious places to live and commuted to work in their offices less frequently.
Chancellor Rishi Sunak’s introduction of a temporary stamp duty holiday that raised the threshold at which a homebuyer paid tax on a newly-purchased house in England from £125,000 to £500,000 provided a further boost to market activity.
The surge in home transactions has helped push UK house prices to record levels even as the housing market has somewhat softened following the end of the stamp duty holiday last September.
Tax break: Chancellor Rishi Sunak’s introduction of a stamp duty holiday that raised the threshold at which a homebuyer paid tax on a house in England boosted home purchases
Figures published yesterday by real estate portal Rightmove showed that the average asking price for homes jumped 10.4 per cent to £354,564 in the year to mid-March, the highest increase it had seen in almost eight years.
Rightmove also claimed there were twice as many buyers in the market than active sellers, the largest mismatch between supply and demand that it had noticed for that time of the year.
There are concerns that the growing cost-of-living crisis in the UK, whether through rising gas, petrol and food prices or the increasingly exorbitant cost of buying a home, would disincentivise people from acquiring homes.
But while Crest Nicholson acknowledged that current political and economic uncertainties would create issues, it said that the coronavirus pandemic ‘has demonstrated its effectiveness at managing its supply chain in turbulent times.’
It added: ‘Demand for housing continues to outstrip supply and Crest Nicholson has a clear growth strategy in place to capitalise on these market conditions.
‘Our operating model is highly efficient and is supported by a strong balance sheet, which will underpin growth in future earnings and provides resilience in times of uncertainty.’
Crest Nicholson shares closed trading 1.6 per cent up at 293.6p on Tuesday. However, they have declined 22.3 per cent this year and are still markedly below their pre-pandemic value.