Barratt Developments publishes weaker sales and reservation levels – but recovery in demand leads to cautious optimism for UK housing market
- Barratt’s net retail reservation rate at active outlets improved to 0.71 per week
- The UK property market was hit hard by last September’s mini-budget
Barratt Developments’ sales remain significantly below last year’s level, but the homebuilder has seen a solid recovery in demand since early 2023.
The homebuilder reported that the net private reservation rate – the number of people who put up for a new home – at its active outlets rose from 0.49 units per average week in January to 0.71 over the following 12 weeks.
It attributed much of the increase in demand to higher multi-unit sales to social landlords and the private rental sector, as well as rising rents and the energy efficiency of its new construction.
Recovery: Barratt reported that net retail reservations at its active outlets increased from 0.49 units per average week in January to 0.71 over the following 12 weeks
Like other UK construction companies, Barratt suffered from a more difficult UK property market during the period, with high mortgage rates and cost-of-living issues weighing on consumer incomes.
Forward sales between January and April 23 totaled £2.96 billion, about a third lower than the same period in 2022, while the net reserve rate was 30.1 per cent lower.
Construction of 3,194 homes was also completed, up from 3,915 last year when house prices soared due to chronic supply shortages, low interest rates and a growing willingness among Britons for extra space.
In the months following the controversial mini-budget last September, reservations at Barratt plummeted by nearly two-thirds due to rising mortgage rates and political and economic uncertainty.
Markets have subsequently calmed down in recent months, leading to a rebound in sales at Barratt, which forecasts annual pre-tax profits of £876.8m for the financial year ending in June.
Chief executive David Thomas said: “In February, we reported early signs of a recovery in our booking rates following exceptionally challenging trading conditions in late 2022.
“While the economic situation remains difficult, we are pleased that more positive sales numbers have been maintained throughout this period and that we are now fully sold ahead for FY23.”
Along with Barratt, rivals Taylor Wimpey and Persimmon reported last week that they had seen a significant uptick in activity in recent months.
UK house prices are also picking up again, rising to £260,441 in April after falling in the previous seven months, according to the latest Nationwide house price index.
Victoria Scholar, head of investment at Interactive Investor, said the numbers “pointed to tentative signs of a recovery in the housing market after the chaos surrounding September’s mini-budget shifts to the rearview mirror.
With the Bank of England approaching the peak of its rate hike cycle, inflation expected to fall this year and last year’s most pessimistic UK economic forecasts unwound, there is hope for a rebound in the UK housing market, which is winding down. offers the back. to the housing sector.’
Mark Crouch, analyst at eToro, added: “Whisper it for now, but Barratt Developments’ trading statement underscores potential green shoots of recovery for the real estate market.
“Taken in tandem with yesterday’s Nationwide home price index and the market would dream that the worst of the decline could be over.”
Barratt Developments Shares were down 0.5 percent on Wednesday morning at 502.8 pence, though their value has risen by about a third over the past six months.