During the summer, cancellation rates were running at 20% but since the Truss/Kwarteng budget of 23rd September, cancellation rates have shot up to 41% as jittery buyers pull out, no longer able to afford – or obtain – a mortgage.
Chairman Dermot Gleeson addresses the company’s annual general meeting today and released this statement on the current outlook.
“In September we announced record revenue and profits for the year to 30th June 2022 and said that we were well-positioned to deliver further profitable growth in the current financial year, notwithstanding the outlook for the broader economy.
“Shareholders will be well-aware that since then much has changed. The market volatility and sharp increase in interest rates following the mini budget impacted buyer confidence and caused a significant slowdown in demand.
“Gleeson Homes cancellation rates which for the first 10 weeks of the [financial] year were 20% have, over the past six weeks, increased to 41%. Net reservation rates have reduced, over the past six weeks, to 0.26 per site per week against 0.42 for the same period last year.”
Dermot Gleeson prefers the fiscal measures being taken by the new government to those of the short-lived last one.
“Whilst it is far too early to call a recovery,” he said, “we were encouraged by yesterday’s autumn statement. We would expect to see the re-emergence of buyer confidence as the wider macro volatility subsides. What is more, there are good reasons to hope that an improving outlook for longer term interest rates will result in greater mortgage availability and affordability.”
He also suggested that his company could find silver linings in the economic clouds. Buyers who previously would not have looked at a Gleeson home may now find that they cannot afford anything else.
“We are now seeing interest from customers who might previously have considered a more expensive property built by another developer but who, in the current environment, are attracted by Gleeson’s more affordable price points,” he said.
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