ousebuilder MJ Gleeson has reported sliding profits and fewer homes sold as it blamed a drop in demand in the market on higher interest rates, the former chancellor’s “disastrous” mini-budget, and the end of the Help to Buy scheme.
The Sheffield-based firm, which sells more affordable new build homes, said it has been a year “characterised by volatility” but that the mortgage market has begun to steady.
The builder sold 1,723 homes over the year to the end of June, down nearly 14% compared to the 2,000 sold the previous year.
Reservations for new homes – an important indicator of demand in the market – also slowed to a lower rate over the summer months, compared to the same period last year.
I am pleased to report a robust performance in a year characterised by economic volatility, a deterioration in buyer confidence and shifting buyer demographics
The group’s profit before tax and exceptional items shrank by more than 43% to £31.5 million from £55.5 million the previous year.
“The combined impact of rising interest rates, the Government’s disastrous mini-budget in September 2022 and withdrawal of Help to Buy in October 2022, all led to a rapid slowdown in the housing market in the second quarter and a significant fall in demand,” the company said in its review of its house division.
There were fewer first-time buyers securing new homes, driven by the Government’s scheme closing to new applications in parts of the UK, the company said.
Instead, existing home-owners drove demand, and more than double the proportion of home reservations came from people over 55.
It led to a shift in buyer demographics over the past year, it said.
Mortgage rates spiked following the September mini-budget, under former prime minister Liz Truss and chancellor Kwasi Kwarteng, and as interest rates have been steadily hiked by the Bank of England to the current rate of 5.25%.
But MJ Gleeson said it is appears that interest rates are nearing their peak as inflation begins to fall.
“Equally, mortgage rates are starting to stabilise and reduce, which we anticipate will start to support a return in market confidence and activity,” it said.
Furthermore, the group said it is set to make more than £3 million in yearly cost savings after cutting down its regional management teams from nine to six, and pushing through redundancies.
Chief executive Graham Prothero said: “I am pleased to report a robust performance in a year characterised by economic volatility, a deterioration in buyer confidence and shifting buyer demographics.”