MJ Gleeson hit by 'significant' fall in demand

MJ Gleeson said on Friday that it has seen a surge in cancellations, after demand slumped in the wake of September’s mini budget.

Updating on trading, the builder - which specialises in low-cost homes for first-time buyers - said market volatility and the sharp increase in interest rates following the-then chancellor’s fiscal statement had knocked buyer confidence and caused a "significant" slowdown in demand.

In the last six weeks, cancellation rates surged to 41% from 20% in the first ten weeks of the year.

Net reservations also fell, to 0.26 per site per week, compared to 0.42 for the same six-week period a year earlier.

Former chancellor Kwasi Kwarteng unnerved markets when he announced £45bn of unfunded tax cuts on 23 September but no spending plans or economic forecasts. The pound plunged and bond yields rose in response, forcing the Bank of England to step in.

On Thursday, his replacement Jeremy Hunt - who had already cancelled most of the measures - unveiled his own budget, which in contrast increased taxes by £25bn and cut spending.

Dermot Gleeson, MJ Gleeson chair, said: "While it is far too early to call a recovery, we were encourage by [Thursday’s] 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 interest rates will result in greater mortgage availability and affordability."

He concluded: "The outlook for the current financial year is dependent up on the pace of recovery in the housing market. Having reviewed a number of scenarios, the board believes that Gleeson Homes could deliver volumes in the range between 1,600 and 2,000 units."

Shares in MJ Gleeson fell sharply as trading got underway, off 10% at 335p by 0815 GMT.