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UK housebuilder Crest Nicholson has warned its full-year profits will significantly undershoot estimates as high inflation and rising interest rates deter people from buying homes.
The FTSE 250 company said it expected adjusted profit before tax of £50mn, down from analyst expectations of £73mn. The hit comes as house sales have slowed in the face of high mortgage costs, following successive interest rate rises by the Bank of England.
“While pricing has remained resilient in a market with limited supply and few distressed sellers, the economic uncertainty is deterring prospective home movers,” the group said.
The housebuilder said house sales had slowed across the market this summer. The number of agreed sales in the five weeks to August 12 was 15 per cent lower than in 2019, according to property portal Rightmove.
Crest Nicholson said trading conditions were unlikely to materially improve before its annual results at the end of October owing to strong core inflation, wage growth and expectations of further rate rises.
The group said prospective first-time buyers in particular had been hit by “significantly more expensive” mortgage costs with no state support to cushion this impact following the end of the government’s Help to Buy scheme earlier this year.
Lenders have in recent weeks cut mortgage rates on the back of lower inflation readings, but analysts warn that they are unlikely to fall below 5 per cent this year. The average five-year fixed mortgage rate has fallen to 5.81 per cent, down from 6.08 per cent at the end of July, according to Rightmove.
The property portal also reported that asking house prices fell 1.9 per cent this month, their sharpest August drop since 2018, in another sign of a slowdown in the property market.
Despite the wider pressure on the sector, analysts at Jefferies said the scale of Crest Nicholson’s expected profit miss would come as a surprise to investors. The housebuilder posted a 60 per cent drop in half-year profits in June, after last year’s “mini” Budget caused mortgage rates to soar.
Shares in Crest Nicholson have fallen more than 30 per cent since the start of the year.