Barratt Developments has warned investors the outlook for the rest of the year is less than certain as homebuyers contend with mortgage disruption and an economic slowdown.
Barratt revealed the first signs of slowing housing activity as forward sales numbers dropped compared to last year, and completions for the period 1st July 2022 to 9th October 2022 fell to 3608 from 3699 in the same period last year.
Despite experiencing a slow down in volumes, Barratt’s average selling a price rose for the 4th consecutive year to £377.2k.
However, the higher average prices were not enough to cement investors’ confidence on Wednesday with Barratt Developments shares falling after the market opened.
The culmination of an uncertain outlook, slowing reservations and today’s contraction in UK GDP saw Barratt Developments shares give up over 5 % in early trade.
Although the Barratts Chief Executive, David Thomas, highlighted conditions would be challenging for the rest of the year, he said adjusted profit would be in line with consensus.
“Whilst the outlook for the year is less certain, we remain on track to deliver adjusted profit before tax for the year in line with current consensus, and we are focused on maintaining our commitment to lead the industry in the quality, energy-efficiency and sustainability of our homes and in our customer service, all of which are fundamental to our ongoing success amid a more challenging market backdrop,” David Thomas said.
Analysts affirmed the challenging outlook, underlining that while there is a favourable long term outlook for UK housing, the near term presented many problems for Barratts.
“Barratt Developments has warned that the outlook for the rest of the year is now less certain, owing to the availability and pricing of mortgages. A deterioration in the affordability of mortgages, especially for first time buyers, is just about the biggest spanner that could be thrown at the builders. While the UK still has a fundamental shortage of houses, the medium term for the likes of Barratt looks hazy at best, bleak at worst,” said Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown.