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Barratt Developments said demand for new homes dropped by almost a third in the past year, sending shares in the UK’s biggest housebuilder down 5 per cent as the homebuying slowdown added to pressure on the property sector.
Net reservations for new homes dropped 32 per cent in the year to June 30, the group said. Barratt reported a “significant deterioration” in demand and said reservations had slowed in recent months, when mortgage rates soared following successive interest rate rises by the Bank of England.
More than half the decline was the result of a 49 per cent fall in demand from first-time buyers as they face higher borrowing costs and the winding down of the government’s Help to Buy scheme.
Chief executive David Thomas said the trading backdrop had become “more challenging” in recent months because of cost of living pressures, while the past financial year had been plagued by “economic and political uncertainty”.
UK mortgage rates have soared as the BoE rapidly reverses ultra-low interest rates in place for more than a decade, with its latest move a surprise half-point rise in its benchmark rate to 5 per cent in late June in an effort to bring down stubbornly high inflation.
The housebuilder said it had completed 17,206 homes in 2023, a 4 per cent decrease on the previous year. An uptick in home completions in spring last year was offset by falling demand for new homes in the wake of former prime minister Liz Truss’s mini-Budget in September, which sent mortgage rates soaring.
The housebuilding sector has come under renewed pressure in recent months as borrowing costs rise, with the average cost of a two-year fixed rate mortgage now higher than after the mini-Budget.
Home completions fell 13 per cent in the second half of the fiscal year, said Barratt, while reservations for new homes slowed by “more than normal seasonal trends” from mid-May to the end of June.
The FTSE 100 company said it expected to build between 13,250 and 14,250 homes in the next financial year.
Barratt also said it anticipated inflation linked to building costs to halve in the next financial year, from roughly 10 per cent in the year to June 30 to 5 per cent in the next period, thanks largely to declining energy and raw material costs.
Its shares slid 5 per cent in early trading on Thursday, dragging down other UK housebuilders including Persimmon, Taylor Wimpey, Vistry Group and Bellway, which all fell between 2 per cent and 4 per cent.
The group said it expected its pre-tax profits for the full year to remain in line with market expectations.
