BARRATT DEVELOPMENTS PLC confirmed a continuing slowdown of new home reservations and sales in its first trading update of its new financial year, for the period July – October 2023.

Slowdown

Barratt’s slowdown in sales reflect the continuing mortgage challenges faced by potential homebuyers. The absence of Help to Buy reservation activity, which accounted for 12% of Barratt’s private reservations in the prior year, is also being felt.

To counteract this, the business has shifted its focus on to multi-unit sales to the private rental and affordable housing sectors, as well as offering sales incentives for private customers.

Total forward sales at 8 October 2023 were 9,221 homes compared to 13,314 homes last year. Their value is £2,362m, compared to £3,603m in 2022 – a 34% decrease.

Barratt’s is now 60% forward sold with respect to private wholly owned home completions for its coming financial year, of which approximately 67% are either completed or exchanged.

The completion profile is expected to remain in line with the typical seasonal pattern with 45% of completions anticipated in the first half of the year and around 55% in the second half.

Land

Barratt says it has a strong existing land bank, however the ongoing uncertainty it faces in the housing market “and the absence of the required adjustment in prevailing land prices”, means the company is maintaining a “highly selective approach to land” throughout FY24.

Housing Outlook

The availability and pricing of mortgages is critical to the long-term health of the UK housing market, the company says, and is key to its market outlook.

Barratt’s focus during the remaining financial year will be on driving revenue through the targeted use of incentives. On the other side, it is continuing to manage build activity and control the firm’s cost base.

The business expects to deliver total home completions of between 13,250 and 14,250 homes in its financial year to June 2024, including c. 650 home completions from our JVs and c. 750 completions for the private rental sector.

Barratt Developments adds, “Whilst we expect that the backdrop will continue to be difficult over the coming months, we are a resilient business with a strong balance sheet and a highly experienced management team.”

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