Housebuilder Barratt warns volatility is clouding outlook
Housebuilder Barratt warned that economic volatility was clouding the picture for the year ahead today as a cost of living crisis and wild swings in the mortgage market look set to slow the UK property market.
In a trading update on its first quarter, the FTSE-100 firm said it had launched 25 new developments – down from 27 in the same period last year – with 3,608 homes in total, down from 3,699 last year.
Barratt warned that the weekly number of homes reserved at its sales sites had plunged more than 30 per cent, while forward sales had slumped and it was planning to “substantially” slash its investment in new land.
The warnings come after a turbulent few weeks in the property market as the government’s tax-cutting mini-budget sent mortgage rates soaring and caused more than 40 per cent of products to be pulled from the market in the days following the budget.
Bosses said demand had tailed off in the second quarter but they doubled down on profit targets for the year.
“We continue to see strong levels of interest across the country, however private reservations remain below the level seen in FY22 as customers react to the wider economic uncertainty,” said chief David Thomas.
“Whilst the outlook for the year is less certain, we remain on track to deliver adjusted profit before tax for the year in line with current consensus, and we are focused on maintaining our commitment to lead the industry in the quality, energy-efficiency and sustainability of our homes and in our customer service, all of which are fundamental to our ongoing success amid a more challenging market backdrop.”
Total forward sales as of 9th October slumped to 13,314 homes however, down from 15,393 at the same point last year.
Shares in the firm were hit yesterday as the home builder revealed its results, plummeting beyond eight per cent at times before recovering to trade around 6.9 per cent at around 16:11.
Barratt doubled down on a planned £200m buyback despite the uncertainty and said they had purchased 10.645m shares for cancellation at a cost of £39.9m.
Analysts pointed to the results as evidence that the government’s plans had been torrid for the property sector.
“If government ministers needed any evidence of how policy missteps can affect not just the financial markets but the real economy, then Barratt Developments’ first quarter results statement provided it in spades,” said AJ Bell investment director, Russ Mould.
“The average weekly rate of private reservations for new houses at its active sales outlets has fallen to 0.55 in the first three months of its new financial year. That is down from 0.82 across the whole of last year and compares to the lowest annual rate of 0.52 way back in 2012.