Barratt Developments Plc is the latest housebuilder to report a slump in home sales as high mortgage rates grip the UK housing market.
(Bloomberg) — Barratt Developments Plc is the latest housebuilder to report a slump in home sales as high mortgage rates grip the UK housing market.
Barratt said its average weekly private net sales rate between July 1 and Aug. 27 was 0.42, according to a statement Wednesday. That’s down from a rate of 0.65 for the year through April 23.
“Customers continue to face cost of living and mortgage affordability challenges, and new developments are increasingly constrained by an ineffective planning system,” Chief Executive Officer David Thomas said in the statement. “We expect that the backdrop will continue to be difficult over the coming months.”
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UK households are facing greater costs triggered by pricey borrowing and inflation that’s reached generational highs. With properties remaining out of reach for many potential buyers, the nation’s biggest developers have issued a series of downbeat statements this summer.
Britain’s four largest listed homebuilders have seen their market capitalizations tumble this year, with Persimmon Plc dropping out of the FTSE 100 last week on the back of a slump in first-time buyer sales. Barratt, Persimmon and Taylor Wimpey Plc, which collectively built more than 45,000 homes last year, are expected to complete fewer properties in 2023 as high rates crush demand.
Barratt said it will use incentives, private rental sector sales, and a “highly selective” approach to land buying to drive revenue in tough market conditions. The homebuilder said it has reduced headcount by 6% from the end of September 2022 through June 30.
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The company expects to deliver between 13,250 and 14,250 homes this year, which is lower than a previous forecast in May of up to 17,000.
“The market is currently impacted by significant macro-economic headwinds, most notably persistent inflation and a higher interest rate environment,” the company said in the statement. “This backdrop has had a negative impact on UK economic growth, employment, mortgage affordability and consumer confidence and spending.”
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