London-focused property developer Telford Homes saw its shares nosedive on Wednesday after it warned that mounting “negative commentary” around Brexit had led to a slump in demand for homes in the capital.
Jon Di Stefano, chief executive, said while the Aim-listed company's long-term plans were on track, “in the meantime we’ve got a period of time where there’s a lot more uncertainty and less transactions actually taking place while everybody tries to figure out what Brexit actually means for them".
The company’s shares plunged by as much as 15pc in early trading before settling at around 365p around lunchtime, down 7.5pc.
Telford, which builds around 1,000 flats per year, has been shifting its attention towards the burgeoning build-to-rent sector, where deep-pocketed institutional investors buy entire developments and rent them out.
But it still needs to sell almost 90 individual homes between now and March 2019 if it is to meet its full-year profit target of more than £50m.
The company said sales of homes below £600,000 had remained “consistent” thanks to demand from owner-occupiers, some of them supported by the Government’s Help to Buy scheme.
But selling those above that threshold, which account for 25 of the 90 it needs to shift, has “become more challenging” with each transaction taking longer to complete as customers remain cautious and look for price reductions.
Mr Di Stefano said: “People are still [buying their own homes] because they want to live somewhere at the end of the day, but if you already own something or you’re an investor of some description why would you make the move today when you’re not sure what’s going to happen in the next few months?”
Build-to-rent has attracted growing pots of cash from patient investors such as Legal & General and M&G. Telford said it was hoping to sign a long-term patnership with one such backer by the end of March next year.
Analysts at Canaccord Genuity said Telford’s shift towards build-to-rent would mitigate negative trends in the rest of London’s housing market but warned it still faced “higher downside risks”.
Telford is expecting completions in the first half of its financial year to be lower than the second half, with a corresponding impact on profits, but said it would still make more than the £8.7m achieved in the six months to September 2017.