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Vistry streamlines business to focus solely on affordable housing
Vistry Group has announced it will merge its housebuilding arm with its partnerships business to focus solely on mixed-tenure affordable housing by the end of this year.
The major house builder revealed its new strategy as part of its half-year update to the stock market for 2023.
Vistry said that in the 10 months since its merger with Countryside Partnerships, which the partnerships business currently operates under, had “made the considerable scale of this affordable housing need even more apparent”.
The partnerships part of the business specialises in joint ventures with housing associations, other public sector businesses and private rented sector providers.
The firm said: “The market fundamentals of the UK housing sector support the creation of a national large-scale partnerships business to deliver sustainable, profitable growth.
“Increasing the delivery of quality affordable homes and home ownership is a key priority for the government, Homes England, local authorities and RPs [registered providers].
“The need for affordable housing in the UK remains acute and there is widespread acknowledgement of an increasing demand-supply deficit for quality new homes across all tenures.”
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As a result, Vistry’s strategy is to focus its operations on what it described as a high-return, capital-light, resilient partnerships model.
Its partnerships business saw good levels of demand in the first half of 2023, with adjusted revenues increasing by 7.1% to £953.6m compared with the first half of 2022.
By comparison, revenue from its house building arm was down 28.3% to £823.5m.
The group’s average weekly sales rate for the period was up slightly thanks to increased delivery with associations and local authorities.
Total revenue for the period topped £1.7bn, a 31.4% increase, but profit before tax was down over 8% at £174m.
Total completions in the first half of 2023 were up over 32% on the same period last year at 7,143.
Of these, partnership completions increased more than 100% to 3,203, while its housebuilding arm delivered 2,847, a more than 11% drop off.
Just last week, Vistry was selected to deliver more than 1,500 new homes across two development sites. in partnership with Milton Keynes Council.
As part of its new strategy, it will transition its 30,000-home strong landbank to its partnerships model with a minimum 50% pre-sold. Of these plots, 8,000 are already designated affordable by planning consent.
Vistry has also identified a number of other opportunities that included using its own registered provider, Linden First, to deliver at scale with a provider of capital, while considering land swaps with competitors that are better aligned to its new partnerships model.
On its outlook for the year, Vistry said there was “good demand” for mixed-tenure affordable housing and “strong demand” from first-time buyers for the shared ownership product it delivers with a partner.
At the same time, open market private sales have slowed further since June, which it said “in part reflecting the traditional quieter summer period but also further increases in mortgage costs”.
The firm said it expects both its housebuilding and partnership arms to secure deals with providers and local authorities throughout the year to mitigate the slow down in the open market.
Greg Fitzgerald, chief executive of Vistry, said: “The integration of Countryside has progressed well in the first half, firmly establishing Vistry as the leading provider of affordable mixed tenure housing in the UK.
“The group delivered a robust half-year performance despite the challenging macroeconomic conditions, with partnerships continuing to see good demand, demonstrating its market resilience.
“In this context and following our annual review of the group’s strategy, the board has concluded that focusing the group’s operations fully on partnerships by merging our housebuilding operations with our partnerships business, best enables sustained growth in housing output, provides greater benefits to our partners, while maximising value and long term returns for shareholders.
Mr Fitzgerald said that delivering on the acute social need for housing across the country is at the core of Vistry’s social purpose.
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