Housebuilder Gleeson Announces Cancellation Rate Doubling

HOUSEBUILDER MJ Gleeson plc is holding its Annual General Meeting (AGM) at which Dermot Gleeson, Chairman, will present the company’s update and outlook.

The company reported record revenue and profits for the year to 30 June 2022 in September and said it is well-positioned to deliver further profitable growth in the current financial year, notwithstanding the outlook for the broader economy.

Chairman Dermot Gleeson said, “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.”

Cancellation Rates

Over the past six weeks, Gleeson Homes cancellation rates increased to 41% up from 20% for the 10 weeks July-mid-September 2022. Net reservation rates have reduced, over the past six weeks, to 0.26 per site per week against 0.42 for the same period. It follows news of similar rises in cancellation rates announced by Persimmon and Taylor Wimpey.

Dermot continued, “Whilst it is far too early to call a recovery, 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.”

Affordable Gleeson Home

“The average selling price on new reservations since the start of the financial year was £186,500, an underlying 9.0% higher than the same period last year. A couple on the National Living Wage can still afford to buy a Gleeson home on any one of our development sites. Furthermore, 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.

“Land continues to be available at sensible prices and the pipeline remains strong,” says Dermot Gleeson.

Gleeson Homes has a pipeline of 16,484 plots with a gross development value of £3.1 billion, of which 8,607 plots are owned and 7,877 are conditionally purchased.

The division currently has 88 active build sites, compared with 82 active build sites this time last year and is actively selling on 68 sites, compared with 60 sites this time last year.

Gleeson Land has completed the sale of one site since the start of the financial year and a further four sites are being actively progressed to sale.

The division’s land pipeline consists of 71 sites which have the potential to deliver approximately 18,775 plots. The portfolio includes 4 sites, with the potential to deliver 1,269 homes, which have planning permission or resolution to grant.

The issues with the congested planning system have continued to delay a number of site consents, Gleeson says, but anticipates that a number of the sites will obtain consents during the second half of the current financial year.

Group Outlook

For the Group as a whole, the outlook for the current financial year is dependent upon the pace of recovery in the housing market, Gleeson says. Having reviewed a number of scenarios, the Board believes that Gleeson Homes could deliver volumes in the range between 1600-2000 units.

A further update will be provided on 13 January 2023 following the conclusion of H1 FY2023.

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