The developer and builder of homes for rent said sale prices and margins were softening and not offsetting ongoing build cost inflation.

In a trading update to the City the listed builder said: “While in H1-2022 build cost inflation was mitigated by increasing asset values, the Group has seen some pricing and margin softness on sales concluded in the second half, with purchasers facing increased funding costs.

“Two forward sales that were planned to close in September have been impacted by the recent market volatility, and these are now planned to transact in FY-2023.

“As a result, whilst H2-2022 performance was materially stronger than H1-2022, the Board now expects FY-2022 underlying operating profit to be c.10% below current market expectations.”

Watkin Jones said investor demand for build to rent assets remains strong and it is confident about future prospects.

It said: “Whilst there remains considerable uncertainty around macroeconomic conditions in the short term, the Group retains very good visibility over its development pipeline, has low levels of asset exposure and strong liquidity.

“We have good revenue visibility coming into the next financial year with c. £270m of revenue secured, and expect demand from institutions for residential for rent assets to remain robust. However we also believe it is prudent to assume that margin pressure as a result of purchasers’ elevated borrowing costs will continue into FY-2023.

“Our balance sheet strength provides a distinct competitive advantage for the Group. We will seek to take advantage of attractive land acquisition opportunities, which should support margin recovery as market conditions normalise.”