Developer profits recover from pandemic decline

Property Reporter
19th May 2022
construction 998

Although they remain below the levels seen prior to the pandemic, developer profits are showing signs of recovery, according to the latest new-build sector analysis from Unlatch.

The new-build sales optimisation platform analysed the profit before tax of the nation’s eight big housebuilders and their pandemic performance.

Research shows that the pandemic immediately impacted profit margins, with total profit before tax falling by an average of -50% between 2019 and 2020 across these eight big-name housebuilders.

Countryside endured the largest annual reduction in profits at -77%, closely followed by Taylor Wimpey (-68%) and Redrow (-66%), with Persimmon seeing the most marginal reduction at -18%.

However, 2021 has reversed this pandemic decline, with developer profits before tax increasing by an average of 102% versus their 2020 slump.

Again, Countrywide and Taylor Wimpey have seen the biggest turnaround, with profits increasing by 209% and 157% respectively. Redrow has also seen a 124% increase, the fourth largest annual increase.

However, the Vistry Group has seen the third-largest uplift, with profits increasing by 140% in 2021, and has also seen the second smallest annual decline in 2020 at -26%.

While the profit taken by these eight industry giants still sits -9% below the pre-pandemic profits seen in 2019, the Vistry Group is also the only developer to buck this trend, with 2021 profits up 79% versus 2019.

The Berkley Group remains the furthest from its pre-pandemic profit margins, with profits taken in 2021 still some -33% off the pace set in 2019.

Lee Martin, Head of UK for Unlatch, says: “Despite the property market boom, the pandemic has posed problems for the nation’s big housebuilders who have had to battle an increase in labour and material costs, as well as numerous workplace restrictions.

"This has inevitably dented output, the result of which was a drop in profits taken during the initial year of the pandemic. However, the sector has worked hard to overcome these issues and we’re already seeing the fruits of this labour materialise in a turnaround in fortunes where profit margins are concerned.

"While the majority are yet to return to pre-pandemic normality, this will no doubt come in 2022 as we return to almost full normality and the sector continues to provide the housing stock that we so sorely need.”

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