UK housebuilder Vistry defies gloom as sales rise and costs fall

UK housebuilder Vistry is “bullish” about the coming year despite worries over a housing market downturn and rising inflation, saying sales are improving and building costs have started to fall.

The FTSE 250 group is targeting more than £440mn in adjusted pre-tax profits this year, 10 per cent higher than analysts’ consensus forecasts. However, the figure is lower than the combined 2022 profits for Vistry and rival Countryside, which Vistry bought last year.

Chief executive Greg Fitzgerald said the housing market was returning to a state similar to 2019 after the ups and downs of the pandemic.

“We are quite bullish,” he said. “We are back to a normalised kind of housing market, pre-pandemic, one which we can very much operate in.”

The optimistic tone contrasts with other big housebuilders who earlier this year said they would scale back construction and warned of a significant slowdown in sales. Home sales were badly hit by the rise in mortgage costs late last year, and housebuilders have also been squeezed by rising building costs.

Fitzgerald said there were signs that building costs were starting to fall, with no big price increases from Vistry’s suppliers in the first quarter and some materials dropping. “We are seeing building [cost] deflation against the last two years, when we saw as high build inflation as we have in my forty years,” he said. “Timber has fallen dramatically in the first quarter.”

Annual UK consumer price inflation hit 10.4 per cent in February, the Office for National Statistics said on Wednesday, higher than economists’ predictions of 9.9 per cent.

Vistry benefits from having a larger share of its business in affordable housing and partnerships with housing associations, which are less affected by property market volatility. Adjusted pre-tax profits increased 20 per cent in 2022 from the previous year to £418mn. Vistry shares rose 3 per cent in early trading on Wednesday.

The company, which includes the Bovis Homes and Linden Homes brands, said its sales had picked up throughout 2023, as the mortgage market stabilised and consumer confidence improved. It said its private sales rate per site per week averaged 0.54 in the year so far, but had increased to 0.62 in the past four weeks.

Aynsely Lammin, analyst at Investec, said: “The profit guidance is reassuring, but does assume sales rates continue to improve.”

Fitzgerald said the turmoil at US and European banks had not affected buyer confidence and that the company did not expect major disruption to the UK mortgage sector.

He said selling prices had stayed steady so far, defying predictions of a big drop, albeit supported by the company offering buyers incentives such as upgraded carpets and fittings.

Vistry also announced that US investor Jeff Ubben would join the board. Ubben’s Inclusive Capital Partners was a big shareholder in Countryside and pushed for its sale, becoming an owner of the combined group. Two non-executive directors, Nigel Keen and Katherine Innes Ker, will depart after serving six and four years respectively.

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