As part of its full year results, Barratt Developments, one of the UK’s largest housebuilders, reported that its home completions fell by 3.9% to 17,206 last year.
In addition, the housebuilder’s adjusted profit before tax was also down, falling by 16.2% to £884.3m.
In light of this, the developer expects market conditions to be “difficult” over the coming months and has targeted 13,250 to 14,250 total home completions for 2024.
Charlie Huggins, manager of the ‘Quality Shares Portfolio’ at Wealth Club, said: “Lower home completions combined with elevated build cost inflation have 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.
“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.
“First-time buyers have experienced even greater pressure, given the limited availability of high loan to value mortgages and the end of the Help to Buy scheme in England.”
He continued: “Barratt is doing everything it can to weather the storm, reducing costs and stepping back from the land market. But like all housebuilders, it has limited control of its own destiny and needs market conditions to improve.
“The outlook for Barratt is 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.
“Until there is greater clarity on the future path of interest rates it seems unlikely market conditions will significantly improve.”
Further Reaction
John Choong, equity and markets analyst at investing comparison platform, InvestingReviews.co.uk:
“Despite the incredible headwinds the housing market has faced over the past year, and an “ineffective planning system”, Barratt has managed to pull off an impressive showing. Home completions dropped by a relatively small 3.9%, which is a decent number compared to its peers.
“While the outlook remains volatile and uncertain, and mortgage affordability remains a challenge, there’s room for optimism if inflation continues 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. This month’s wage and inflation data, and the next rate decision on 21 September, will be key to the performance of the housing sector over the next year.”
Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial:
“Barratt are the latest house builder to announce results and they look to be the best of a bad sector. They have reinforced the view of the construction sector that uncertainty in politics and monetary policy are making it difficult to forecast next year’s financials, but 2023 didn’t look too shabby for Barratt in relation to its competitors.
“It’s clear that inflation in the sector squeezed margins, but revenue and profits held up and were mainly comparable to the previous year. This is a set of figures that the management can be proud of.”
