MJ Gleeson profits beat forecasts as demand for ‘affordable’ homes grows beyond first-time buyers amid cost of living squeeze
- Housebuilder says it has started to see interest from ‘value-driven’ customers
- Its average selling price increased by 15% to £167,300 over the past year
- Pre-tax profit in the year to end of June rose 33%
MJ Gleeson has posted bumper profits after seeing demand for its ‘affordable’ homes expand beyond the first-time buyer demographic.
The firm told investors on Thursday it is increasingly taking business from customers who would have normally gone for more expensive properties, as they scale back their aspirations amid the cost of living crisis.
While first-time buyer demand has remained strong since the start of its new financial year in July, the housebuilder and land investor said it has started to see interest from ‘value-driven’ customers.
Upbeat: MJ Gleeson said its affordable homes are becoming more attractive during the crisis
Its homes, priced at an average £167,300, are 59 per cent cheaper than the average selling price in its geographic regions of £266,000, it said.
‘We have had a good start to the current financial year,’ MJ Gleeson chief executive James Thomson told investors.
‘First time buyer demand, driven by the shortage of new homes, remains strong.
‘Moreover, the cost of living challenges faced by many home buyers means the affordability of our homes is leading to additional interest from customers who might not previously have considered a Gleeson home.’
In the year to the end of June, the group sold 2,000 homes, nearly 200 more than in 2021, at an average selling price of £167,300 – £21,500, or 15 per cent, higher than the previous year.
This lifted revenue by 26 per cent to £334.6million, with rising house prices more than offsetting material and labour cost increases.
Annual pre-tax profit jumped by a third to £55.5million, beating forecasts of £53million.
The group opted to hike its dividend by 20 per cent to 18p.
Thomson said the group was well positioned to grow profit further in the current financial year thanks to its offering of affordable homes at a time when budgets are squeezed.
Even factoring in future hikes in borrowing costs, ‘cost of living pressures […] will further enhance the attractiveness of a Gleeson home’, he added.
‘Strong first time buyer demand, driven by the acute shortage of new homes, is expected to continue, albeit with more modest house price growth widely expected in the short term,’ the group said.
‘Crucially, the affordability of our homes will help to mitigate the impact of both inflationary pressures and higher interest rates for first time buyers and home movers, which will continue to drive demand.’
MJ Gleeson shares rose 5.6 per cent to 490p in afternoon trading on Thursday.
The upbeat tone of MJ Gleeson’s update is in contrast to the more cautious comments made by rival housebuilders this month.
While all property developers have reported strong profits on the back of soaring house prices, they have also warned of a slowdown in demand.
Yesterday, Redrow said the property market was ‘moderating’ back to normal levels following two strong years, while Barratt boss David Thomas said current trading was ‘more challenging’ during July and August.