The real estate debt advisory specialists analysed the pre-tax profits of the nation’s 12 largest housebuilders and found that in 2019, prior to the COVID-19 outbreak, they totalled £5.4 billion. However, they have since fallen to £2.7 billion in 2020 - a pandemic decline of -49%.
The worst-hit developer has been Keepmoat whose profits declined by -152% between 2019 and 2020, but it was a difficult time also for Countryside (-77%), Redrow (--66%), Taylor Wimpey (-64%), Bellway (-64%), and Crest Nicholson (-62%).
While these annual profit losses are significant, in some cases extraordinary, the limited insight available on 2021 profits reveals early signs of recovery for the vast majority of developers. Of those developers that have so far published profit reports for 2021, all but one have seen positive bounceback after a difficult 2020.
The strongest post-pandemic rebound comes from Redrow whose pre-tax profits increased by 124% from 2020 to 2021. Bellway’s profits increased by 102%, Barratt’s increased by 65%, and Berkeley’s profits rose by 3%. But the Galliford Try Group, whose pandemic profits in 2020 saw an astonishing 247% increase, experienced a significant post-pandemic drop of -119%.
Despite these developers largely enjoying an uplift in profits between 2020 and 2021, no developer has yet managed to work their way back to the pre-pandemic profits of 2019.
Berkeley remains -33% down on pre-pandemic profits, Bellway is -28% down, Redrow remains -23% behind 2019 profits, and Barratt remains -11% behind.
Nicholas Christofi, Managing Director of Sirius Property Finance, commented: “While much of the property market enjoyed a pandemic-inspired boom, housebuilders and developers were not so lucky. Initial workplace restrictions caused construction sites to shut down for a period of time and, when allowed to reopen, COVID continued to cause problems both on-site and across the global supply chain, sending the cost of materials skyward.
"Furthermore, economic uncertainty meant that backers and investors were less inclined to pump money into major developments until the dust had truly settled.
"All of this meant that in 2020, fewer projects were completed and those that were took much longer and cost a great deal more than planned. Hence the significant decline in annual profits more or less across the board.
"The good news is that signs of a recovery are now showing and while pre-pandemic profits have not yet been reclaimed, the industry is definitely moving in the right direction.”
