Barratt sees ‘difficult’ housing market ahead amid higher mortgage costs

The housebuilder said mortgage costs would be ‘critical’ to the outlook for the property sector.

Housebuilder Barratt Developments has warned the property market will remain “difficult” as higher mortgage costs hit demand (PA) (PA Wire)

Housebuilder Barratt Developments has warned the property market will remain “difficult” as higher mortgage costs hit demand.

The group said it saw weekly reservations for new homes slump to 169 from 188 since its year-end on June 30.

It cautioned over an “uncertain” outlook, “with the availability and pricing of mortgages critical to the long-term health of the UK housing market”.

Barratt added it expect “the backdrop will continue to be difficult over the coming months”.

Shares in the firm fell 3% in mid-morning trading on Wednesday.

The trading environment remains difficult, with potential homebuyers still facing mortgage challenges

David Thomas, Barratt chief executive

The gloomy update adds to similar comments by rivals in recent months as the housing market has been knocked hard by soaring interest rates and wider economic worries, which has impacted home buyer demand.

On Tuesday, Bellway said it would build nearly a third fewer homes over the year ahead, predicting it will deliver about 7,500 new builds in 2023-24, down 31% from 10,945 the previous year.

Newcastle-based Bellway also said it was expecting house prices to drop by 5% in 2022-23 as it ramps up incentives to try to boost buyer demand.

Official figures also out on Wednesday showed that on a seasonally adjusted basis, the average UK house price edged up by 0.2% in August 2023, following a month-on-month decrease of 0.3% in July 2023.

But recent figures from lending giant Halifax showed house prices fell by 0.4% to £278,601 in September and were 4.7% lower year on year.

David Thomas, chief executive of Barratt, said: “The trading environment remains difficult, with potential homebuyers still facing mortgage challenges.

“Against this backdrop, we are focused on driving revenue whilst continuing to manage build activity and carefully control our cost base.”

The group reiterated expectations for up to 23% fewer home completions in 2023-24, at 13,250 and 14,250 homes, down from 17,206 in the previous year.

Like many of its rivals, the group is resorting to heavy incentives to boost flagging demand, while it is also reining in its land buying and keeping costs in check.