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Vistry stays upbeat on robust demand for new homes

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Demand for new homes is still strong despite rising interest rates and inflation, according to Vistry Group, the latest large housebuilder to downplay the effect of the UK’s economic slowdown on the property market.

The FTSE 250 housebuilder said in an update on Friday that demand from buyers was above last year’s already elevated levels and that it anticipated full-year profits at the top end of guidance.

The upbeat statement followed a similar announcement by FTSE 100 developer Persimmon on Thursday and contrasts with mounting fears about a housing market slowdown, precipitated by rising rates, inflation and fears of recession.

Those concerns have weighed on shares across the housebuilding sector in the past six months. Vistry’s share price is down by around 28 per cent over that period, Persimmon’s 34 per cent.

But Greg Fitzgerald, Vistry’s chief executive, said “whilst mindful of the wider economic uncertainties, we are positive on the outlook for the group.”

On Thursday, Persimmon said demand was unaffected by issues in the wider economy, and that it expected profits for the year to be “modestly above our expectations”.

Both builders are confident they can pass higher construction costs — which have resulted in part from the disruption to supply chains caused by the pandemic and war in Ukraine — on to consumers by raising property prices.

“The market is still pricing these stocks for a pretty sharp correction and there’s still no sign of it,” said Clyde Lewis, an analyst at Peel Hunt.

“The only real reason you could see that 30 drop [in shares] justified is if house prices start properly falling . . . The market is assuming too big a correction over the next 12-24 months,” he added.

Rising costs and an under-resourced planning system are likely to be bigger obstacles, according to Lewis.

Persimmon warned on Thursday that its ability to develop homes was being hampered by delays in the planning system and issues navigating new guidance from Natural England, which regulates the environmental impact of new homes. That was slowing the pace of construction, warned the group, and was ultimately likely to weigh on sales.

Lewis said little would change unless the government grasped the nettle by reforming the planning system or investing in local planning departments. “It’s a bottleneck and I can’t see it easing,” he said.

But addressing the planning system is a dim prospect in the short term. In one of his last acts before announcing he would resign on Thursday, prime minister Boris Johnson sacked housing secretary Michael Gove.

Johnson has since installed Greg Clark, a former housing secretary, to run the department, but few in the sector anticipate major policy announcements before a new Conservative leader is chosen later this year.

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