One of the largest construction companies in the UK, Crest Nicholson, has recently issued a profit warning due to the impact of high inflation and rising interest rates in the property sector. According to the warning, the company expects full-year profits to reach £50 million, falling short of analyst expectations of £73.7 million. Crest Nicholson attributes this decline to worsening trading conditions over the summer, where a significant reduction in sales occurred as a result of economic uncertainty deterring potential home movers.
The company also highlights the problem faced by first-time buyers, who are struggling with increased borrowing costs. Crest Nicholson notes that without government support to cushion this impact, the situation becomes even more challenging. Furthermore, the company does not anticipate a significant improvement in trading conditions until October of this year.
The profit warning from Crest Nicholson has had a significant impact, causing a 14% decline in the company’s share price and wiping off half a billion pounds from the entire housebuilding sector. This negative trend has also affected other major players in the industry, including Redrow, Vestry, Taylor Wimpey, Persimmon, Barrett, and Berkeley, all of which experienced a drop in their stock prices.
Recent data from Rightmove reveals that asking prices for homes in Britain have experienced the largest August decline since 2018. This decline is attributed to soaring mortgage costs, which have put buyers under increased pressure.
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