Redrow, based in Flintshire, has forecasted its revenue for the 2024 financial year to be between £1.65 billion and £1.7 billion. However, its pre-tax profits are expected to be lower, ranging from £180 million to £200 million. This projection places Redrow’s annual results towards the lower end of its anticipated outcomes.

Impact of External Factors

Several factors have compounded to impact Redrow’s trading negatively:

• Rising Building Material Costs: The increasing cost of building materials has significantly affected Redrow’s operational expenses.
• Restrictive Planning Laws: Delays in obtaining approvals for new-build projects due to stringent planning laws have hindered Redrow’s ability to expand its offerings.
• End of the Help to Buy Scheme: The conclusion of this government scheme has led to a reduction in the number of potential buyers.

Reservation Values and Selling Prices

In the 18 weeks leading up to November 3, Redrow experienced a 25% year-on-year drop in the value of net private reservations, amounting to £384 million. This decline was partly due to a 2.5% decrease in average selling prices, now at £471,000. More significantly, the sales rates at Redrow’s outlets fell from 0.63 per week in 2022 to 0.49 per week.

Mortgage Troubles and Cancellation Rates

Redrow also faced challenges due to increased mortgage difficulties, particularly evident ‘lower down the chains.’ This issue has led to a rise in cancellation rates, now at 25%.

Redrow’s Customer Profile and Market Adaptation

Redrow’s clientele generally comprises wealthier individuals, with over a third being cash buyers. Despite this, the company has had to adjust to the challenging market conditions by modifying its build rate and managing operating costs.

Industry Comparison and Criticisms

Comparisons with Other Housebuilders

Redrow’s situation contrasts with some of its peers in the property development sector. For instance, Taylor Wimpey has projected its annual profits to be at the higher end of its guidance. Similarly, Persimmon has updated its new-build outlook positively, despite a significant drop in new home completions.

Criticisms and Accusations

The broader property development sector faces criticism for ‘land banking’ and perceived greed, as evidenced by £16 billion in dividends paid out over the past 18 years. Critics argue that these practices contribute to the current challenges in the housing market.

Stock Market Response

Following the release of its trading update, Redrow’s shares fell by 5.9%, marking them as the biggest faller on the FTSE 250 Index.