By Aby Jose Koilparambil and Suban Abdulla
(Reuters) -British housebuilder Redrow (LON:RDW) warned on Wednesday it expected its profit to more than halve in the current financial year after posting a 4% decline in annual earnings amid a sharp slowdown in the sector.
The latest warning from a UK housebuilder comes as rising interest rates push up mortgage costs and dampen buyer demand, with Britain's largest housebuilder Barratt having last week flagged difficult trading conditions.
Recent measures of Britain's property market have shown house prices falling at the fastest pace since 2009 and a decline in mortgage demand, reflecting the Bank of England's decision to raise interest rates 14 times since December 2021 in an effort to tame inflation.
"Whilst the market did partially recover in spring 2023, the further rise in mortgage rates combined with the cost of living crisis means the market remained subdued," Redrow Chairman Richard Akers said in a statement.
However Akers said there were some grounds for a less negative outlook. "Following several consecutive Bank of England base rate increases, we remain hopeful that, as inflation eases, we will see some stability in mortgage rates."
The Wales-based builder, which constructs mostly bigger houses than rivals and sells them to second or third-time movers, forecast profit before tax in a range between 180 million pounds ($224 million) and 200 million in its year to July 2024.
For the full-year ended July 2, the company, a member of {{27|Britain's FTFTSE 250 index index of midrange stocks, posted an underlying pretax profit of 395 million pounds, down from 410 million the year before but surpassing a company-compiled average analyst estimate of 367 million.
Shares in the company gained more than 5% as of 1152 GMT.
It said it expected to pay out a reduced annual dividend of 14 pence per share next year, compared with a 30p payment for the year gone by.
($1 = 0.8022 pounds)