UK’s biggest housebuilder Barratt to cut back on construction as rising mortgage rates sink sales
Ministers have been accused of being ‘anti-development’ as one of the country’s biggest builders said it would drastically cut construction.
The Home Builders Federation (HBF), a trade association that represents firms responsible for 80 per cent of new homes built in England and Wales each year, said the end of measures such as Help to Buy meant there was ‘no Government scheme in place to support first-time buyers at the very point it is most needed’.
The lobby group also warned a lack of affordable mortgages was ‘inevitably impacting housing supply’.
‘Builders can only build if buyers can buy and, allied to the Government’s broader anti-development policy approach, in particular on planning, the lack of mortgage availability is inevitably impacting housing supply,’ an HBF spokesman said.
Help to Buy was a scheme that allowed first-time buyers to borrow money from the Government to help them purchase newly built houses. It ended in October last year.
Downturn: The Home Builders Federation said the end of Help to Buy meant there was ‘no Government scheme in place to support first-time buyers at the very point it is most needed’
The HBF’s broadside came as Barratt Developments, the UK’s biggest housebuilder, revealed it could build 20p per cent fewer homes this year amid a downturn in property markets.
The FTSE 100 firm expects to build between 13,250 and 14,250 homes in the 12 months to June 2024, down from 17,206.
Chief executive David Thomas said the backdrop has become ‘more challenging in recent months’ with many prospective buyers suffering ‘significant cost of living pressures’.
Its order book’s value dropped to £2.2billion at the end of last month, from £3.6billion a year ago.
Interest rates, since December 2021, have risen from 0.1 per cent to 5 per cent, have cranked up the costs of mortgage repayments and increased requirements for prospective buyers, with the cost of two-year fixed rate mortgages hitting a 15-year high this week.
Barratt’s bleak outlook sent shockwaves across the sector. Its stock dropped 1.6 per cent, or 6.8p to 411.2p while rival Persimmon dipped 0.1 per cent, or 1.5p, to 1049.5p and Taylor Wimpey fell 0.3 per cent, or 0.35p, to 104.5p.
Things were similarly bad among the FTSE 250 builders with Bellway down 0.4 per cent, or 8p, to 2022p, Crest Nicholson shedding 3.2 per cent, or 6p, to 182.6p and Vistry sliding 0.9 per cent, or 6p, to 681p.
‘For years housebuilders benefited from almost-perfect conditions. Buyers could borrow easily at extremely low rates, the Government provided its own help, and supply and demand dynamics underpinned rising prices,’ said AJ Bell’s Danni Hewson.
‘That is no longer the case and so margins and profitability are under pressure.’
The number of homes built in Britain hit a peak of 425,830 in 1968 but fell to a low of 135,590 in 2013, according to Office for National Statistics data.
While numbers have recovered slightly since, they remain well below the Government’s target of 300,000 a year, tightening the supply and pushing up prices.
That has made it even harder for first-time buyers. Ministers have also come under fire for seemingly not doing enough to resolve the issue.
In a report today, the House of Commons levelling up, housing and communities committee said it would be ‘difficult’ for the Government to achieve the 300,000 figure if mandatory local housing targets were scrapped as part of planned reforms.
Committee chairman Clive Betts also warned that annual housebuilding would ‘go down to around 150,000 a year’ under the plans and the shake-up was ‘already having a damaging impact on efforts to increase the building of new homes’.
