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Redrow: Higher selling prices offset lower sales

Housebuilder Redrow sold 6 per cent fewer homes in the first 18 weeks of its current financial year, compared to the same period during 2009, but this was offset by average selling prices increasing by 16 per cent.

House sales in the first 18 weeks were £133 million, a 9 per cent increase on the same period last year, despite the group selling 6 per cent fewer houses.

The uplift in sales was caused by average selling prices climbing by 16 per cent to £174,000.

Redrow expects the shift upwards, in terms of average selling prices, to continue as it increases sales of its more upmarket “New Heritage Collection”.

In a statement released to the stock exchange today, directors said they are frustrated at their inability to grow the business more quickly in the current market.

The statement said: “In recent months there has been much scaremongering in the media about the state of the housing market.  Although the market has undoubtedly been affected by the current economic climate, underlying demand remains strong as there are tens, if not hundreds of thousands of people wanting to buy their first home.  Private sector rents are rising as first time buyers are being stifled by the chronic shortage and affordability of mortgages.

“Most people are left with little choice but to go into the private rented sector or live with their parents. Every week we are forced to turn away potential purchasers simply because they do not have a deposit of 25 per cent or more; people with excellent jobs who under normal circumstances would easily qualify for a mortgage.”

Highlighting the current problems in the mortgage market, the statement added: “The demand for new homes remains strong, but with only six lenders now covering over 90 per cent of the lending market, the mortgages to meet that demand are not available.  In the last three years the number of mortgage products available to buyers with deposits of 5 per cent or less has fallen from 1,224 to just 33.  The situation could get a whole lot worse if the FSA’s proposed changes in its Mortgage Market Review come to fruition.”

Redrow currently has a five year supply of land and its net debt is currently just £58m.

The firm said that each house being built leads to 6 jobs, so that a further 100,000 houses could lead to 600,000 jobs being created.

An increasing focus on the “New Heritage Collection”, which will account for a higher percentage of sales in the future, is part of an ongoing strategy, where Redrow will sell higher quality traditional family houses, resulting in higher margins.