Redrow continues progress despite mortgage shortages
HOUSEBUILDER Redrow has continued its turnaround with founder Steve Morgan back at the helm, reporting an £8.5m profit in the six months to December compared with an £8.7m loss in the prior year.
The improved profits have been achieved on the back of a 15% increase in sales to £216.1m despite what Morgan described as “a housing market overshadowed by economic uncertainties, tax rises and government cutbacks”.
Morgan said that the business has been “transformed” over the last two years, with products such as its New Heritage Collection making a difference not only in lifting perceptions of the company’s brand but also its margins, he said.
The number of completions achieved was slightly higher at 1,312, while the average selling price also improved to £170,500, from £147,300.
Morgan said that its focus on the New Heritage Collection homes had moved Redrow more firmly into the middle of the housebuyers’ market, which means that its reliance on the first-time buyer market had lessened.
“However, we remain concerned about the impact on the market as a whole of the historically low turnover in first-time buyer housing transactions,” he said. “There are many more would-be middle market purchasers who are unable to proceed due to the lack of first time buyers in the housing chain.
He blamed the “chronic shortage of affordable high-loan-to-value mortgage products in the market”.
“Nobody wants to see the return of the irresponsible lending of a few years ago. Nevertheless 90%+ mortgages, which previous generations of first-time buyers were able to take for granted, are now prohibitive on the grounds of both availability and cost.”
He said that housebuilding could provide a huge boost to the economy if the crisis in mortgage lending could be resolved, stating that only six lenders were willing to provide 90%-plus mortgages.
“While it is still too early to call the spring market the second half has started encouragingly with reservations during the first 6 weeks comfortably ahead of the same period last year.
“Looking ahead, house prices have been stable for some considerable time now and we do not share the pessimism of some commentators that there will be a major fall in house prices during the coming year.
“Given the improved quality of our land bank, the roll out of the New Heritage Collection and the unquestionable housing shortage, I feel that Redrow is in good shape to continue to make progress.”
