Barratt Developments, the UK’s largest housebuilder, today showed how a “marked slowdown” in the market hammered its order book, as the cost of living crisis and higher mortgage costs bite.
Barratt said its forward order book, which includes properties in its joint venture projects, dropped to 10,511 homes valued at £2.5 billion as at the end of December. A year earlier it was 14,818 homes at £3.8 billion.
The FTSE 100 firm said weekly reservation levels have fallen since the group’s last update in October, and also cautioned that full-year home sale completions could come in below what analysts had pencilled in.
Although total home completions in the first half to December 31 was 8626, up from 8067, and average selling prices increased to £330,000 from £288,000, chief executive David Thomas pointed to a marked slowdown in the UK housing market during the period.
He added: “Political and economic uncertainty impacted the first quarter; this was then compounded by rapid and significant changes in mortgage rates which reduced affordability, homebuyer confidence and reservation activity through the second quarter.”
The firm said the second quarter saw a “material impact from the significant escalation in mortgage interest rates on both affordability and homebuyer confidence”.
Victoria Scholar, head of investment at Interactive Investor said: “Rising mortgage rates, a slowing housing market, build cost inflation and the fallout from the mini-budget have been key headwinds for Barratt Developments in recent months.”
Scholar said: “Cost-of-living pressures are prompting many potential homeowners to hold off from buying a property as they wait hopefully for mortgage rates and house prices to cool later this year.”
If Barratt’s reservation rates increase with normal Spring trading patterns the company will remain on track to complete on 17,475 sales in the year to June. However, should that not occur, and trading remains at recent levels, it would expect the number to be in the range of 16,000 to16,500.
Barratt said it has taken a number of actions to respond to current conditions, “including significantly reducing land approvals, pausing recruitment of new employees and introducing further controls for new site openings to manage our working capital deployment”.
Shares in the housebuilding giant, currently under construction on around 2000 homes in London, fell 5.9p, or 1.4%, to 417.7p.
