It expects market conditions to remain difficult over the coming months
Total home completions fell by 3.9% year on year for Barratt Developments, which attributed he decline on the property market slowdown experienced from September last year.
In the 12 months to the end of June 2022, the property developer completed 17,206 homes, down from 17,098 on the previous year.
The firm’s adjusted profit before tax dropped by 16.2% from £1.05 billion to £884.3 million, in line with market expectations.
David Thomas (pictured), chief executive at Barratt Developments, believed that despite the figures, the company had delivered a strong operational performance in a challenging operating environment.
“Customers continue to face cost-of-living and mortgage affordability challenges, and new developments are increasingly constrained by an ineffective planning system,” Thomas stated. “Today’s results reflect the hard work and dedication of our teams and the decisive actions we have taken as a business to respond to market conditions.”
Barratt Developments is the latest housebuilder to report a slump in home sales as high mortgage rates grip the UK housing market https://t.co/AgWpkV6iJC
— Bloomberg (@business) September 6, 2023
However, Charlie Huggins, manager of the quality shares portfolio at Wealth Club, said the lower home completions, combined with elevated build cost inflation, had taken their toll on Barratt Developments and its peers.
“New home buyers are clearly exercising greater caution, and the outlook for the coming months is highly uncertain,” he added. “Mortgage rates have increased significantly over the past year and have been highly volatile from one week to the next, making it very difficult for home buyers to plan their next move.”
Barratt expects market conditions to remain difficult over the coming months, targeting total home completions of 13,250 to 14,250 in the new financial year.
“While we expect that the backdrop will continue to be difficult over the coming months, we are a resilient business with a strong balance sheet and an experienced management team,” Thomas said. “We remain committed to building the communities that our customers want to live in – delivering high-quality, sustainable homes at competitive prices to help address the country’s housing crisis and drive long term, sustainable growth for our business.”
John Choong, equity and markets analyst at InvestingReviews.co.uk, pointed out that while the outlook remained volatile and uncertain, and mortgage affordability remained a challenge, there was room for optimism if inflation continued to fall along with gilt yields.
“After all, mortgage rates have been sliding down over the past month and could see further retrenchment if next week’s unemployment and wage data have a ‘weak’ showing,” he said. “This month's wage and inflation data, and the next rate decision, will be key to the performance of the housing sector over the next year.”
Huggins described the outlook for Barratt as “murky at best right now.”
“Cracks are starting to appear in the housing market, and while interest rates should be close to peaking, first-time buyers remain under enormous pressure,” he added. “Until there is greater clarity on the future path of interest rates it seems unlikely market conditions will significantly improve.”
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