Crest looks to build on success – and avoid bubble

Crest Nicholson has played down fears of a new boom in property prices in its maiden results since a triumphant return to public markets in February.

The housebuilder rejoins the FTSE 250 this week following its 220p-a-share float four months ago, which valued the business at £553m. Its shares have surged more than 50 per cent since then, and added another 1.5p to 339.5p yesterday after Crest beat forecasts with profits of £28.1m in the six months to 30 April.

Along with its peers, Crest has been buoyed by the Chancellor's Help To Buy drive to boost the new homes sales with equity loans – although the initiative has sparked concerns that prices could surge as builders fail to keep up with the demand.

The Bank of England's latest survey of systemic risks warned this week that one in four risk managers at UK financial institutions worried over a potential slump in house prices at some point in the next three years.

Stephen Stone, Crest's chief executive, thinks the market will avoid a bubble "provided that the industry can meet supply". He added: "New homes represent around 11 per cent of the overall market and we are not seeing rampant inflation in the second-hand market."

However, increasing supply will not be straightforward as it takes six months to build a house even on sites that have planning permission.

Mr Stone said: "In the best credit conditions ever, we were building 170,000 homes a year, and now we're down to 115,000 to 120,000 a year, so it is going to take some time to get back there."

City analysts are more outspoken on the prospect of rising prices.

Chris Millington, at Numis, said: "The increase in demand against a supply chain which is likely to be slow to react, has increased the prospect of house price inflation, which should boost margins and benefit Crest disproportionately given the length of its land bank."

Nearly two-thirds of the company's 17,000-strong land bank is in London and the South-east, where prices have been the most buoyant and the economy strongest.

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