Grainger says housebuilder woes will maintain house prices

The UK’s largest quoted residential landlord said it is confident that an imbalance between supply and demand, caused by the reduction in residential development because of the fall in values, will prevent house prices plummeting.

Despite a positive long term outlook on the UK residential market came Grainger conceded the short term remains tough. It reported a slight drop in net asset value from 732p in September 2007 to 707p.

‘Whilst the general residential market has tightened considerably, principally through a lack of readily available finance, the long term imbalance in the UK between supply and demand remains,’

Grainger chairman Robin Broadhurst said. ‘New house build levels in the last quarter of 2007 at 40,735 units were the lowest for some time and indicate an annual level of supply well below the Government target of 240,000 per annum.

‘In addition, recent announcements from housebuilders indicate that supply will remain low for some considerable period of time.

‘Inevitably this will act as a support for long term house prices.’

Broadhurst said the short term horizon remains tough.

He added: ‘These are unquestionably difficult times for any company involved in the residential sector and it is clear that our performance and financial position to the end of this year will be adversely affected by falls in asset values,

‘Since the period end we have noticed weakening in values and an increase in the time taken to complete sales.

‘In response to the current market conditions we are exercising great caution when considering potential acquisitions.

‘We are also disposing of assets to improve liquidity further. We will continue to extract value from our portfolios as circumstances dictate.’

The company reported that operating profits were up 26% to £48.2m off the back of higher rents and improved trading profits.

Pretax profit for the six months to May this year fell by 83% to £200,000 from £12.1m last year.