Clarion’s profit margin halves

Clarion has seen its profit margin on new-build housing halve in the past year on the weakening London market.

In a third quarter trading update to the City of London, the UK’s largest housing association said its margin on for-sale and shared ownership housing in the 12  months to December 2019 had fallen to 14.5%, compared with 30% in the same period in 2018.

The update said the organisation’s surplus – effectively its profit – had fallen to £199m in the three quarters to December, compared with £230m in the year before. This drop in surplus came from increased investment in building safety as well as £7m from the drop in profit from sales. 

Clarion, which owns 125,000 houses, said this drop was “in line with prevailing market conditions”.

The news came despite the association increasing its development programme. It said capital investment grew to £425m from £388m, with sales generating an income of £88m in the year to December, compared with £67m in 2018.

It said affordable housing would make up 80% of its programme.

In 2018/19 Clarion started work on 2,663 homes. It is aiming to build 50,000 homes over the next 10 years.

Last year several London and South-east associations said they were pausing or reining in development programmes in the wake of a weak sales market in the capital.

However, there have been reports since last month’s election of a rebound in the housing market, with the RICS reporting rising buyer enquiries.