Barratt Developments Plc has seen a sharp slowdown in sales rates as high borrowing costs and the threat of a house price plunge combine to undermine the UK property market.
(Bloomberg) — Barratt Developments Plc has seen a sharp slowdown in sales rates as high borrowing costs and the threat of a house price plunge combine to undermine the UK property market.
The average number of weekly private sales at Barratt’s sites has more than halved, leading the firm to warn that it could deliver fewer homes than currently expected, according to a statement Wednesday. With a seasonal uptick in demand in the spring it will still complete 17,475 homes but without that the figure could be between 16,000 to 16,500 homes in 2023.
“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,” Chief Executive Officer David Thomas said in the statement.
The homebuilder said net private reservations per week fell to 0.3 in the six months ended Dec. 31, compared with 0.69 in the same period a year earlier. That’s as the company’s forward order book dropped to 10,511 homes in the same period, compared with 14,818 a year prior.
Barratt also said net land approvals were negative during the period, with a net 290 plots cancelled. This reflected the increased uncertainty in the UK housing market, the company said, which faces disruption as it adapts to higher mortgage rates and gloomy house price forecasts.
Over 800,000 UK households will see their mortgage rates more than double this year as they come off fixed-rate deals, according to an Office for National Statistics analysis of Bank of England data. These soaring borrowing costs are the main driver behind predictions of a 10% drop in values this year.
Read more: Over 800,000 UK Households to See Mortgage Rates Double in 2023
Barratt warned that its full year performance will depend on how the housing market evolves in the early months of 2023.
“The outlook for the second half of FY23 is uncertain with homebuyer confidence and the availability and competitive pricing of mortgages critical to the health of the UK housing market in the coming months,” the company said in the statement.
–With assistance from Jack Sidders.
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