Barratt could end up building almost a quarter fewer homes over the coming 12 months as high interest rates and the cost of living crisis weaken the market for newbuilds.
Britain’s biggest housebuilder said new home completions could fall by more than 20 per cent over the next year to between 13,250 and 14,250. That compares to 17,206 new homes which it built in the year to the end of June. Shares in the business dropped 5 per cent on the news to 397p – down from 500p just two months ago.
It comes as the Office for National Statistics said the 海角视频 economy shrank by 0.1 per cent in May, and after reports that average two-year fixed mortgage rates are now higher than the levels seen following last autumn’s disastrous mini-budget when Lis Truss was briefly PM.
READ MORE: {}
Meanwhile the Royal Institution of Chartered Surveyors (Rics) said that inquiries for homes, sales and property prices all slipped back further in June as mortgage rates increased.
Barratt, which has its headquarters near Coalville, Leicestershire, and its roots in the North East, includes Barratt Homes, Barratt London, David Wilson Homes and commercial property developer Wilson Bowden.
Barratt chief executive David Thomas said: “During a year of economic and political uncertainty, we have delivered a strong operational and financial performance, while maintaining our industry-leading quality, customer service and sustainability credentials.
“Whilst the trading backdrop has become more challenging in recent months, with many of our customers facing significant cost of living pressures, we have responded decisively – increasing our reservations into the private rental sector, using incentives for customers in a disciplined way, and flexing our build activity, land-buying and operating costs to reflect market conditions.
“As a result, we enter the new financial year in a robust financial position with a solid forward order book and we are ready to respond to any further changes in the housing market."
Most Read
In a trading update for the latest 12 months Barratt said adjusted pre-tax profit was expected to be in line with market expectations at around £180 million before adjustments – which include costs of £115 million set aside for fire safety and external cladding remedial works. Pre-tax profits were £412.5 million the year before.
Prices for private sales in its forward order book have also dropped sharply, down 8.7 per cent at £342,900 on average, partly down to the group’s use of incentives to boost demand.
Halifax has said house prices fell at their fastest annual rate in 12 years last month, down 2.6 per cent at £285,932.
Barratt saw demand tail off after last October’s mini-budget market chaos sent mortgage rates soaring, before recovering a little in its third quarter, though it said reservations “slowed more than normal seasonal trends” from mid-May to the end of June.