McCarthy & Stone Weakness Highlights Concerns and Uncertainty Facing UK Housing Market

Builders and providers of homes for the elderly McCarthy & Stone reported in it’s full-year results that, following the UK’s vote for Brexit, reservations are down and cancellations are up.

The first nine months of its financial year to August 2016, however, provided enough activity for the group to deliver a 31% increase in revenue which should lead to a 19% profit increase on 2015.

While the company’s overall financial results were upbeat, it was the detail on the final two months of trading and concerns over the secondary housing market that caught the eye.

“There has been evidence of some weakness in the secondary housing market since our trading update on 29 June,” McCarthy & Stone’s chief executive officer Clive Fenton said in a statement. “Whilst website enquiries have increased, and we have continued to take new reservations, these have been at a lower level than we saw in the first nine months of the financial year and cancellations have been at higher levels.”

Mr. Fenton added that there had been evidence of improved appetite in August – in line with the latest housing market surveys – but uncertainty remained over whether that improvement would continue.

The company is also reported to be encouraging business with a number of more flexible financial packages for buyers including deferral packages and further negotiation on price.

The slowdown in the secondary market suggests that either fewer older home-owners have been willing to put their current homes up for sale amid the post EU referendum uncertainty, or that fewer pre-owned homes that are up for sale are being sold. It could also be a combination of the two. Whichever form the slowdown the slowdown has taken, the result for McCarthy & Stone and potentially other house builders, is to underline the uncertainty that is expected to last for years.

In addition to the impact on individual home builders, if older buyers were to become less active in the housing market that would also be a bad sign for house prices on a national basis. That’s because the over 65’s continue to make up a larger percentage of home-owner occupiers, data from the Office for National Statistics (ONS) shows.

McCarthy & Stone isn’t the only builder to show uncertainty over recent trading and its outlook. Berkeley Group has warned that rising costs could weigh on builders’ ability to deliver the much needed homes in the capital. While the company took care not to link its concerns over the London housing market to Brexit too closely, comments and worries on the rising costs of building imposed by the Government and mention of the secondary market are clearly based on builder’s ability to achieve even higher prices for property in the capital at a time when demand isn’t as strong as it has been.

 "What is increasingly clear is that Government policy, which has been helpful outside London, has had a negative effect on the capital,” Berkeley said in a recent trading statement. "Transaction taxes are now too high and this is restricting both mobility in the second hand market and the pace of supply and delivery of new homes in London and the South East.”

This latest stream of news further underlines the importance of a workable housing plan from the government that will encourage builders to continue and even increase their building rates, while making homes more affordable for those who need them. A tricky, but now essential balancing act.