News Column

Redrow Says UK Housing Market Reverting To More Seasonal Patterns

September 1, 2014

Anthony Tshibangu

LONDON (Alliance News) - Housebuilder Redrow PLC Tuesday became the latest housebuilder to say the UK housing market is reverting to more normal levels, as it reported an increase in profit and revenue for its recent full year.

The company, which said pretax profit almost doubled in the full-year, said market conditions have returned to a more seasonal pattern of activity, meaning fewer people buying in the summer, with more in the spring and autumn. This comes after Berkeley Group Holdings on Monday said the UK housing market has reverted to normal transaction levels from the high point witnessed in 2013.

Redrow, which marks its 40th anniversary later this year, posted pretax profit of GBP132.6 million for the year to June 30, up from GBP69.4 million a year earlier, as revenue rose to GBP864.5 million from GBP604.8 million.

Like its peers, the company has ramped up housebuilding in the face of strong demand. It said legal completions rose 27% to 3,597 compared with 2,887 a year earlier, spurred by the UK government's mortgage financing scheme Help to Buy.

The first phase of the Help to Buy scheme in England started in April 2013, making buyers of newly built homes eligible for a 20% equity loan from the government on top of their 5% deposit. The scheme has been extended until 2020 from its original 2016 end date. The second phase, which started in the autumn of 2013, guarantees a portion of a buyer's mortgage of new and existing homes and hasn't so far been extended beyond its current end date of 2016.

During the year, Redrow said 1,023 of private legal completions were made under the Help to Buy scheme compared with 82 a year earlier. Redrow said a large proportion of these were first-time buyers and over half were in the north of England.

FTSE 250-listed Redrow said the summer months of 2013 saw Help to Buy activity at its peak, with reservations running at particularly high levels. However, this year, the period from July 1 to date has seen a more normal summer selling pattern.

The sales rate for the last financial year reached a level of 0.70 per week, compared with 0.62 per week a year earlier.

"Now that Help to Buy has settled down, we do not expect any further increases in sales per outlet. Further growth in the business now needs to come primarily from growth in outlets rather than sales rate," Redrow said.

At the period-end the company said it was operating from a total of 103 outlets compared with 92 a year earlier.

"An increase in the number of outlets is absolutely necessary to enable Redrow, and indeed the housebuilding industry, to increase the supply of new homes to meet the country's needs," the company said.

Meanwhile, the company said it made some progress in terms of its land bank. During the year it secured a total of 6,092 new plots, of which 2,139 were converted from its forward land bank.

At the period-end the company's land bank totalled 16,724 plots, an 18% increase on the previous year. However, the average plot cost rose to GBP63,000 from GBP57,000 a year earlier, primarily as a result of a higher percentage of land being in the south.

"Market conditions have returned to a more seasonal pattern of activity. We have substantially increased our land bank, which should see a good growth in the number of outlets during the year," Chairman Steve Morgan said in a statement. "This, combined with our strong order book, leaves me confident that the group will see another year of significant progress."

On the back of its performance the company increased itsdividend to 2 pence from 1 pence a year earlier.

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Source: Alliance News

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