Vistry, one of the UK's largest housebuilders, has dramatically slashed prices on some of its new homes by as much as 17% or more than £100,000 per property in an attempt to boost cash generation and cut debt. The move comes after a year of declining share price and profit warnings, reflecting broader struggles within the construction sector.
RBC (Royal Bank of Canada) analysis found that across over 1,200 Vistry properties listed in May, prices were reduced on average by 8.4%. This drastic pricing strategy is a response to significant challenges facing Vistry, including high construction costs and lower buyer demand caused by higher mortgage rates.
The UK housebuilding industry as a whole is grappling with increased pressure, driven by factors such as global supply chain issues, geopolitical events, and the impact of the social housing building programme delays on companies like Vistry. According to Anthony Codling, Managing Director of Equity Research at RBC Capital Markets, this has led to 'particular reliance on government programmes' for companies in the sector.
Vistry confirms it is taking targeted pricing initiatives to reduce inventory levels and improve cash flow, alongside its efforts to reduce debt levels. The company maintains a forward order book worth £4.5 billion, indicating its continued ability to operate at scale despite the market challenges.
The price reductions by Vistry underscore the financial strain on new build developers due to factors such as stalled government initiatives, rising input costs, and reduced buyer affordability driven by the tightening mortgage market. This move is a marked shift from recent years when new build premiums were more common, following a period where several housebuilders, including Vistry, faced allegations of price collusion.