Barratt Developments is preparing for tougher times ahead as the cost-of-living crisis and soaring mortgage rates combine to undermine the UK property market. The home-builder said private reservations, the average weekly number of homes reserved at its sales sites, has dropped more than 30 per cent, forward sales have declined, and that it is planning to “substantially cut” its investment in new land.
Barratt also pulled back on ambitions it laid out last month to increase completions by between 3 per cent and 5 per cent in the 2023 financial year. Instead the home-builder said it now expects them to be similar to 2022 levels.
“Barratt’s trading update flags a chilling effect of the fast-deteriorating housing outlook, with the company dropping plans to boost 2023 completions just one month after announcing the goal in early September,” Iwona Hovenko, a London-based Bloomberg Intelligence analyst, wrote in a note. “The deterioration of the average reservation rate to 0.55 homes a week per site also shows the impact of fast-rising mortgage rates.”
Barratt fell as much as 8.6 per cent in London trading, to the lowest since November 2013. Rival home-builder Persimmon also fell, down 4.3 per cent.
“Based on our completions to date, our strong forward order book and current market conditions, we now expect wholly-owned completions to be in line with those reported in FY22,” the firm said in the statement. “The outlook for the year is less certain with the availability and pricing of mortgages critical to the long-term health of the UK housing market.”
Still, the company says it remains on track to deliver adjusted pre-tax profit for the year in-line with its full-year guidance.
The average UK five-year fixed rate mortgage on a home rose to 6.32 per cent on Wednesday, the highest since November 2008 and up from 5.97 per cent a week earlier, according to Moneyfacts Group Plc. That is as the average two-year fixed-rate deal climbed to 6.46 per cent, the most since August 2008. – Bloomberg.
