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Crest Nicholson warns of housing Brexit effect, London weakness
November 15, 2017 / 7:47 AM / 7 days ago

Crest Nicholson warns of housing Brexit effect, London weakness

(Reuters) - UK housebuilder Crest Nicholson Holdings Plc (CRST.L) pointed to Brexit-related barriers to new house construction on Wednesday while joining a slew of property firms in flagging signs of weakness in central London property markets.

Shares of Crest Nicholson, which said average house price growth across its UK business fell to almost a quarter of that in 2016, fell as much as 8.4 percent.

While emphasising the market was “robust” chief executive Stephen Stone said a building material shortage caused by Brexit-driven delays in investment was holding back builders from meeting industry targets for construction.

The UK housing industry says it needs to build around 250,000 properties a year just to meet pent-up demand, which has pushed up prices and rents, stopping many younger people from getting onto the property ladder.

The target is routinely missed and Stone said the government, which has talked of building a million houses in five years, also needs to do more on policy to support growth and investment.

The United Kingdom’s largest housebuilder Barratt Developments Plc (BDEV.L) also separately flagged an industry-wide skills challenge on Wednesday.

“If you want to see a housing market that is going to deliver 250,000 houses in a year, it needs more capacity in the supplier chain and that means more investment,” Stone told Reuters after the trading update.

“The sooner Brexit, the decisions related to Brexit, and the economic consequences are resolved, more companies will invest.”

Crest would also lobby for Eastern European labourers to be classified by the government as skilled labour, Stone said, estimating that they make up about 12 percent of the total workforce in housing construction.

Workers from former communist eastern Europe have flooded to the UK over the past decade but fear being excluded by immigration curbs after the United Kingdom leaves the European Union in 2019.

LONDON FALLING

With concerns over Brexit weighing and the Bank of England this month raising interest rates for the first time in a decade, the Royal Institution of Chartered Surveyors (RICS) said last week that house prices in Britain were no longer rising.

In London they are falling at the fastest pace since 2009, it added, knocking shares of house builders including Crest Nicholson.

Crest Nicholson said that the housing market was generally robust across its principal operating areas and sales prices continue to show moderate growth, although Central London transactions were suffering from some volume and price weakness.

“The UK domestic market is still pretty strong,” Stone said. “It’s the fact that sentiment maybe has changed from overseas buyers in zone 1 London.”

Average selling prices for Crest’s homes increased 5.4 percent to 391,000 pounds in 2017 compared to growth of 18 percent in 2016.

Crest Nicholson, which builds homes in south Wales, London and southern and eastern England, said its underlying sales rate per outlet per week fell to an average of 0.77 from 0.81 last year. However, it stuck to its sales target for 2019 of 1.4 billion pounds.

Shares of Barratt Developments were also down 1.6 percent after it reported flat sales per site per week of 0.74 in the period from July 1 to Nov 12 on Wednesday.

Reporting by Radhika Rukmangadhan in Bengaluru; editing by Patrick Graham

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