The UK housing market is showing “early signs” of recovery, Crest Nicholson has said, despite warning over low levels of demand and after missing its profit expectations for the year.

The Surrey-based housebuilder said it had seen inquiries pick up since the end of 2025.

It nonetheless gave a downbeat assessment of the market over the past year, pointing to tougher conditions that have prevailed even though interest rates and inflation have eased.

“The housing market remained sluggish throughout 2025 compared with much of the previous decade, with comparatively high mortgage rates, low consumer confidence and an absence of meaningful government support all contributing to the depressed levels of demand,” the company said in its full-year results announcement.

The company also indicated that there could be “material uncertainty” over its position as a going concern if trading worsens further.

Crest said it currently expects to meet all its banking covenants, but could breach these by April in a “severe but plausible” scenario.

It also stressed that it “maintains good relationships and a regular dialogue with all its lenders, and is confident that an amendment to its covenants would be secured if necessary”.

But its accounts said that this is “not guaranteed” and could therefore impact the firm’s ability to continue.

Crest, a developer of new build homes and communities, said it completed the sale of 1,691 homes in the year to the end of October, about a 10th fewer than the previous year.

Its pre-tax profit came in at £26.5 million – about 31% higher than the prior year, and below previous guidance of between £28 million and £38 million.

This was due to there being a weaker market over the second half of the year, Crest told investors.

It cautioned that this sentiment had continued into the new year, with demand failing to pick up since the autumn budget and confidence among UK consumers remaining low despite four interest rate cuts last year.

“However, since Boxing Day, forward indicators, including website visits, inquiries and appointment conversion, show early signs of improving activity levels,” it highlighted.

Lower interest rates and government support for housebuilding should help improve affordability and supply in the longer term, according to the business.

2026 will be a “transitional year in a difficult market”, boss Martyn Clark said, with the firm focusing on a range of “self-help measures” to get through.

Crest closed one divisional office in December which resulted in about 50 redundancies.