Election uncertainty sends UK property market into reverse

On Jun 14, 2024

Updated: 22:03, 13 June 2024

Struggling housebuilder Crest Nicholson has rejected a £650million takeover offer from rival Bellway.

The details came just hours after Crest, which has its headquarters in Surrey issued a profit warning that sent its shares tumbling.

Newcastle-based Bellway said there was a ‘compelling strategic and financial rationale’ for a tie-up with Crest.

A deal would be the latest consolidation in the sector after Barratt agreed to buy rival Redrow for £2.5billion.

And it comes a day after life insurance giant Legal & General revealed that it had put its Cala Homes division – the UK’s tenth biggest housebuilder – up for sale.

Election uncertainty: Mortgage rates have been volatile because of changing expectations about when the Bank of England would cut its benchmark interest rate from 5.25%

Bellway made its offer on May 7 and said the approach was rejected.

Its valuation was at a 30 per cent premium to Crest Nicholson’s share price at the time the offer was made, Bellway said.

The disclosure of the offer came after the close of trading last night.

Crest’s shares had slumped by 11.6 per cent, or 28p, to 212.8p, valuing it at just £547million after its profit warning.

The shares will be in sharp focus again today after the offer was disclosed.

Crest said yesterday that demand had weakened amid ‘volatility’ in mortgage rates and that the General Election had created ‘short-term uncertainty’.

Annual profits are now expected to be between £22million and £29million, down from previous market expectations of £39million.

The update came as a Royal Institution of Chartered Surveyors survey showed a recovery in UK housing appeared to have ‘slipped into reverse’.

Virgin Money warns over profits

Lender Virgin Money warned lower interest rates could squeeze profits over coming months – as it prepares to be taken over by building society Nationwide.

Tough competition is also among ‘headwinds’ set to take their toll on margins in the second half of the financial year.

Virgin has paused some restructuring efforts ahead of the expected completion of the £2.9billion deal with Nationwide in the final quarter of this year.

It reported an 18 per cent rise in profits for the six months to the end of March, to £279million.

Business lending and unsecured loans grew but mortgages fell by 2 per cent.

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