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UK mid-sized homebuilders expect sustained demand beyond tax break

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·2-min read
View of a new build development of Britain's largest homebuilder Barratt Developments in Aylesbury
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(Reuters) - UK homebuilders Redrow and Vistry Group signalled on Wednesday that sales would be strong even after the expiry of a tax exemption that supported the market over the past year.

Smaller rival Crest Nicholson Holdings also predicted demand to be resilient after the property tax break for first-time buyers ends in September.

The government incentives, including a mortgage guarantee scheme, coupled with increasing demand for spacious properties during lockdowns, have helped homebuilders outshine the wider real estate sector during the pandemic.

Redrow, which exited its London operations to focus on other regional businesses, said it expects turnover to rise about 45% to 1.94 billion pounds for fiscal 2021, and 2 billion pounds in fiscal 2022.

However, the targets are still lower than the 2.11 billion pounds it booked in its last fiscal year before the pandemic.

"The group has entered the 2022 financial year with a very strong order book and the sales market remains robust," the company said.

FTSE 250-listed Redrow's shares rose more than 4% by 0810 GMT, while Vistry's inched up 0.5%.

Vistry said it was confident of meeting its 2021 market consensus, which forecasts profit more than doubling when compared with 2020.

Analysts expect a pre-tax profit of 328.7 million pounds for 2021, compared with reported earnings of 143.9 million pounds in 2020 and 188.2 million pounds in pre-pandemic 2019, according to Refinitiv IBES data.

"Housebuilding remains on track to deliver a significant step-up in completions to about 6,500 units, and an improvement in adjusted gross margin to about 22% in full year 2021," Vistry said.

The company completed 4,652 units in fiscal 2020 and reported a gross margin of 17.6%.

(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Shounak Dasgupta)

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