- FTSE 250 group ‘encouraged’ by easing mortgage rates in recent weeks
Vistry defied pessimism among industry peers on Friday with the housebuilder telling investors it was ‘encouraged’ by easing mortgage rates.
The FTSE 250 group said it had enjoyed ‘good levels’ of demand for affordable homes, which it specialises in, from local authorities as well as renewed strength in the private rented sector in the final quarter of 2023.
Vistry’s forward sales position was up 12.4 per cent year-on-year to £4.5billion at the end of 2023, while the transition of its landbank to a ‘partnerships’ model, which sees the group ramp up its social housing offering, is progressing well.
Upbeat: Housebuilder Vistry defies industry gloom and reports ‘good levels’ of demand
The average two-year fixed residential mortgage rate is currently 5.66 per cent, down from around 6.8 per cent in the summer of 2023, according to Moneyfacts data. The average five-year fixed residential mortgage rate today is 5.28 per cent.
Vistry said: ‘[The] easing of mortgage rates in recent weeks is encouraging and we are optimistic that this will help stimulate demand in FY24.
‘[And the] housing crisis [is also] expected to be at the top of the political agenda in the lead up to a general election, with Vistry extremely well positioned to play its part in increasing the delivery of affordable homes across the country.’
Builders suffered a slowdown in demand for homes in 2023 as high mortgage costs put buyers off, while firms have also been hit by a rising cost of materials and wages.
Consequently, last year saw a significant drop in the number of new homes built and sold.
Contracts awarded for construction projects in the UK fell by £11.1bn to £69.2bn in 2023 after a record prior year, with residential housebuilding deals slumping by 13 per cent, according to industry analysts Barbour ABI.
Industry peer Persimmon warned on Wednesday that it expects the UK property market to remain ‘highly uncertain’ this year, particularly for first-time buyers.
However, the group said it anticipates lower mortgage rates and build costs boosting its completion numbers in 2024, which helped to lift share prices across the sector on renewed optimism.
Meanwhile Taylor Wimpey reported a sharp drop in the number of homes it built last year.
Taylor Wimpey said the ‘planning system remains slow’ and ‘challenging’ – delaying much-needed new developments across the country.
Vistry, however, expects 2023 adjusted pre-tax annual profits to come in ahead of forecasts of £410million.
Boss Greg Fitzgerald said: ‘The group had a strong run into the year end and I’m pleased to report that adjusted profit before tax for FY23 is anticipated to be ahead of guidance. Our FY23 performance has demonstrated the resilience of Vistry’s unique partnerships model.
‘Looking ahead, working with our highly valued partners we are committed to increasing the delivery of much needed homes across the country, and in the fourth quarter have continued to secure exciting new developments that reflect our high return, asset-light partnerships model.’
Vistry shares were broadly flat at 967p on Friday afternoon.
Managing director for equity research at RBC Capital Markets Anthony Codling said: ‘In the current challenging housing market, Vistry’s partnership model is working well.
‘The strategy is being implemented at pace and so far there have been no slips or trips. In our view the shares are priced for perfection trading at a 30 per cent premium to the sector.
‘Should the open market conditions improve other housebuilders are likely to outperform from here. We remain Underperform and recommend that investors start their year by taking some early profits in Vistry.’
