MJ Gleeson home sales plummet amid rising interest rates

MJ Gleeson has not escaped the troubles affecting the property industry, with the low-cost housebuilder reporting a slump in home sales.

The construction company, which built Sheffield’s Crucible Theatre, revealed it sold 1,723 homes for the 12 months ending June, compared to 2,000 the previous year.

Demand for mortgages has fallen over the past year due to the Bank of England hiking interest rates on 13 successive occasions to dry and dampen inflation levels caused primarily by soaring food and energy prices.

Analysts have also blamed former Prime Minister Liz Truss’s controversial mini-budget last September for severely damaging homebuyer confidence.

An average fixed-rate mortgage lasting two years now has a 6.5 per cent interest rate, while a five-year deal is 6.04 per cent, according to data provider Moneyfacts. 

Despite this, MJ Gleeson told shareholders its properties were becoming ‘increasingly attractive’ to Britons who would previously have made a more expensive purchase.

For the second half of the reporting period, its reservations per site tipped up to 0.64 per week.

Over the same time, the group saw a ‘significant shift’ in customer demographics, with the proportion of open-market reservations by first-time buyers shrinking from 71 per cent to around half.

In contrast, the share of sales to over-55s, who are more likely to be homeowners, doubled from 10 to 20 per cent.

It also noted that the average selling price of one of its properties grew by 11.3 per cent during the year to £186,200, far offsetting the extra labour and building material costs.

Graham Prothero, chief executive of MJ Gleeson, said: ‘We are pleased with the year’s performance in a challenging economic environment.

‘We have taken advantage of the quieter market to restructure Gleeson Homes, putting the business in great shape to grow as the market recovers.’

However, UK house prices are now falling following a long-run period of expansion resulting from a shortage of new developments, low interest rates and a temporary stamp duty holiday introduced in the summer of 2020.

Figures published on Friday by high street lender Halifax showed the country’s property prices in June experienced their largest annual drop in 12 years, falling by 2.6 per cent to an average of £285,932. 

They are likely to fall even further should the Bank of England raise interest rates again, which seems highly likely given that the current UK inflation rate of 8.7 per cent is more than quadruple the central bank’s target rate of 2 per cent. 

MJ Gleeson shares were 2.1 per cent lower at 377p on late Friday afternoon and have contracted by approximately a quarter in the past 12 months.