Increased expenses and setbacks in planning affect MJ Gleeson's profits negatively.
Affordable Housing Giant MJ Gleeson Struggles
MJ Gleeson's share price took a significant hit on Tuesday as the company warned about increased build costs and weak home price growth affecting their profits this year.
Specializing in affordable homes and land development, MJ Gleeson also outlined the impact of planning delays that will likely persist into 2026.
Despite a strong first half performance, with revenues up 4.2%, and encouraging signs of a housing market recovery with reservation rates skyrocketing by 45% in the early stages of 2025, the pace of recovery does not seem sufficient to outweigh the current headwinds – including increased build costs, stagnant selling prices, the continued use of incentives, and bulk sale transactions.
MJ Gleeson's full-year guidance was initially based on the expected sale of "extensive land holdings in East Yorkshire." Unfortunately, delays in this sale mean the group now anticipates their homes business operating profits to be 15-20% below expectations. The gross margin for the year to 30 June will likely fall 1% short of previous guidance, with a similar impact expected for 2026.
MJ Gleeson's land business has completed three transactions and is working on seven more before the end of the year.
Are the Troubles Industry-wide?
MJ Gleeson's stock dropped 22%, and their troubles had a ripple effect on other affordable housing firms like Persimmon and Vistry Group, with shares falling 1.4% and 1.9%, respectively.
The concerns raised by MJ Gleeson echo broader trends and challenges within the UK housebuilding sector:
- Economic Conditions: The construction sector has been witnessing a decrease in output since April 2025, though residential activity shows early signs of stabilization.
- Skills Shortage: The industry is grappling with a significant skills shortage, requiring over 216,000 additional workers by the end of 2025.
- Global Trade Disruptions: New US trade tariffs are causing uncertainty, potentially impacting construction activities through disruptions in essential cement imports.
- Financial and Borrowing Conditions: Higher energy and labor costs make it challenging for the sector compared to international competitors, with borrowing conditions becoming more difficult due to mortgage rate increases.
Analysts at Peel Hunt believe margins pressure from the affordable housing market may be felt across the sector, as competition intensifies with a second-hand sector experiencing high stock levels. Planners from all firms are also dealing with planning issues that impact the entire sector.
To see a material uptick in housing supply, the sector needs demand-side support, according to analysts. These challenges, combined with the specific circumstances faced by MJ Gleeson, offer insight into the complexities currently facing the housebuilding sector.
- The struggles experienced by MJ Gleeson, a prominent player in the affordable housing sector, may indicate a broader challenge in finance and business related to real-estate investments, as their troubles seem to have had a ripple effect on other companies like Persimmon and Vistry Group.
- The housing sector in the UK continues to grapple with numerous challenges, including economic conditions, skills shortages, global trade disruptions, and difficult financial and borrowing conditions, all of which may put pressure on margins for affordable housing market participants and intensify competition.
