Crest report strong financials but warn that interest rate rises could moderate 2007 sales and house prices

Crest Nicholson has warned that increases in interest rates could hold back house sales in 2007.

It said that recent interest rate rises meant that “affordable ratios” for new homes had become stretched and that more moderate house sales and prices could result in 2007.

In the longer term the housebuilder was more confident and said that the continuing housing shortage and low unemployment would underpin house prices.

The housebuilder reported a 2% rise in profit to £80.1m for the year ended 31 October 2006. Housing completions increased 22% to 2946 and were expected to increase a further 15% in 2007. The bulk of 2006 increases came in the regeneration business and Crest said volumes would increase strongly in this area in 2007 and 2008.

Crest’s strategy of focusing on affordable housing meant that average selling prices fell from £225,000 to £199,000.

Commenting on the results chief executive Stephen Stone said: “I am delighted with the way the company has performed in my first year as CEO. We have achieved record operating profits and laid solid foundations for future growth.”

“Given a steady housing market we can look forward with confidence. The length and strength of our land bank, the progress of the regeneration business, and the steps we are taking to improve the business leave us will positioned to delver strong growth over the next few years.”

On January 12 the Crest board said it intended to recommend an offer for the business from Castle Bidco. The Takeover Panel has given Castle Bidco until February 28 to make an offer.