According to the executive chairman of Redrow, John Tutte, the capital will feel the biggest impact when the government's Help to Buy scheme ends in 2023.
Announcing the housebuilder’s results for the year to June 30 2019 - which revealed a sixth consecutive record year for the business - Tutte said that, with the steady take up of the equity loan initiative in the capital, he had concerns post-2023 when the successful initiative is due to end.
Tutte stated, “The uptake of Help to Buy in London has been steadily growing. It’s a higher equity loan at 40% [of the sales price]. It’s hard to think that this can just be cut off in 2023.”
He also said that Redrow would push for a transitional arrangement in the capital “so there is a period of adjustment,” Help to Buy had not been the main driver of Redrow’s profit growth, Tutte pointed out. “It has been the icing on the cake.”
The housebuilder said it was putting forward its Heritage Collection as a strategy to combat any effects from the changes to Help to Buy in 2021 and its discontinuation. With the collection, it said it planned to capture more buyers from the second hand market.
Tutte comments: “Two thirds of our sales come from the secondary market – this strategy is to increase that share. The Heritage Collection is what secondary market buyers want: character, space, higher doors and an opportunity to customise their home."
He said that some second hand buyers “criticise the industry for building little boxes. We’re in a privileged position to have the Heritage product. We’ve not really promoted it strongly over recent years”.
Tutte also said he was “absolutely delighted” that the group had achieved another record performance during its financial year. Legal completions rose 13% to 6,443 new homes against FY 2018, which Tutte described as a “milestone”.
The growth was driven by a 55% increase in affordable housing delivery to 1,712 homes. But this did not signal a decision to increase affordable housing levels in uncertain times, Tutte said.
Accordingly, group revenue grew 10% to a “record” £2.1 billion, with pre-tax profit also hitting a high of £406 million, up 7%.
The increase in social housing output caused Redrow’s average selling price to dip 2% to £324,500. Meanwhile, its private average selling price lifted 2% to £389,500 due to geographic mix and a “small element” of house price inflation.
Redrow also said that, to mitigate the risk of a no-deal departure from the EU, over the past year it had worked with its supply chain to identify any disruption the business could experience.
Tutte concludes: “Since the start of the new financial year, trading has been encouraging and the demand for our homes is strong with reservations running ahead of last year. Notwithstanding the political and economic uncertainty we face, we have every reason to be confident that 2020 will be another successful year for the group.”