Reporting a recent increase in customer demand after a “slower start to the year”, Countryside Properties stated half year trading results had been “solid” and they were on track to achieve their full year expectations.
From October 1st 2018 to March 31st 2019, total completions across their Housebuilding and Partnerships divisions increased by 43% to 2,362 homes (compared to the same period last year.)
However, total private average selling price of the homes dropped to £377,000, a fall of 4%, due to an increased contribution from the company’s regional businesses.
Completions in the Housebuilding division were “as expected”, remaining relatively unchanged at 473 (H1 2018’s = 483) although there was a higher proportion of private sale homes.
In addition, Countryside have been chosen by Homes England to deliver 769 homes across two new developments at Burgess Hill, West Sussex and Tattenhoe, Milton Keynes, securing work for the future.
Countryside declared that customer demand in the second quarter had been “good and we have achieved private reservations at the top end of our target range. As expected, completions will be second half weighted but with a strong forward order book and further outlet openings in the second half, we remain on track to deliver expectations for the full year.”
CEO at Countryside, Ian Sutcliffe, said: “Despite the wider political and macroeconomic uncertainty, demand for mixed-tenure homes remains strong and we have enjoyed a robust spring selling season. With our modular timber frame factory now operational, we continue to be well positioned to deliver on our geographic expansion.”
Following a recent warning from Taylor Wimpey about how build cost inflation would lead to lower margins this year, shares across the housebuilding market saw a significant drop. This statement created a selloff among housebuilders, with Persimmon, Barratt and Berkeley all losing 2-4%, while Bovis, Redrow, Bellway and Crest Nicholson dropped by 2.5-4.4%, with Taylor Wimpey themselves shedding more than 4%
“We have seen higher than expected cost inflation in early 2019, particularly in materials, and now expect build cost inflation for 2019 to be c.5%,” said Chief Executive, Pete Redfern. “This is driven by a combination of underlying cumulative inflation and exchange rates impact on the cost base of suppliers, and a higher than expected demand in the short term from defensive additional buffer stock holding in the construction industry supply chain.”
Nevertheless, in their trading update for the first four months of 2019, the volume housebuilder reported that the demand for new build housing has remained stable due to accessibility to mortgages, low interest rates for customers and continued high employment levels.
“Average private sales for the year to date were 1.03 per outlet per week (2018 week 16: 0.85) which is ahead of our expectations for 2019 and demonstrates continued progress in optimising our larger sites as part of our strategy. Sales pricing has remained flat relative to the end of 2018. Cancellation rates remained low at 13% (2018 week 16: 13%).”
“We remain on track to meet our overall expectations for the year but expect results to be weighted towards the second half. Given the strong sales performance, we expect full year volumes to be slightly higher than 2018, but given the greater build cost inflation for the year, we expect margins to be slightly lower.”
“Our priority remains to deliver further improvements to customers, as part of our customer-led strategy, which will in turn drive increased value for shareholders,” Redfern said. “We are pleased to have recently been recognised as a five-star homebuilder with a customer recommendation score of over 90%, as measured by the National New Homes Survey undertaken by the National House-Building Council (NHBC), on behalf of the Home Builders Federation (HBF).
“We remain focused on getting our homes right first time and creating thriving communities, together with enhancing our delivery capability and investing in the right resource to enable us to deliver high-quality homes to more customers in the years ahead.”
The latest ‘Housing Pipeline’ report by the Home Builders Federation and Glenigan, has reported the second highest annual total on record of permissions granted. So, whilst slightly lower than 2017’s figure of 371,878, 2018 resulted in of total of 369,417 homes. (The numbers represent permissions that will mainly be built over the next 2-5 years.)
HBF put this success down to the ongoing commitment by housebuilders to “deliver further increases in housing supply in the years ahead” and continued investment in securing land and site approvals despite uncertain political and economic conditions.
The report continued by stating that housing supply had increased in the past 5 years by 78%, with 222,000 homes added last year. However, this total remained “some way short” of the number of homes needed, based upon the government expectations of 300,000 homes to be built by the mid-2020s.
Strategies by the industry for recruitment and training to ensure both the volume and quality of homes were acknowledged by the HBF, along with the improvements in customer satisfaction which showed that “quality and satisfaction levels are also now increasing”.
Uncertainties though remain; HBF claimed that the industry wished to work with central and local government “to ensure that local authority planning departments have sufficient resources to deal with the increased level of applications being submitted” and reiterated that local authorities were still taking “far too long” to manage planning permissions to the point where building could begin. The report also pointed out that a steady economy was necessary, as was an operational housing market to ensure permissions became homes and added that uncertainty from potential purchasers and a weak second-hand market could obviously be a “threat” to the industry.
HBF’s executive chairman, Stewart Baseley, said: “Today’s report shows that despite the wider political and economic uncertainties, builders are maintaining record levels of investment. The industry continues to work with central and local government to ensure local planning departments have the capacity to deal effectively with the increased number of applications.
“It is also pushing government for confirmation that it will have ongoing access to skilled labour from abroad post Brexit, which will be key to its ability to build out these sites.”