The UK’s biggest housebuilder
has stopped hiring new staff as it revealed housing completions over the
current financial year could fall by as much as 11% if the current housing
market weakness doesn’t recover in the months ahead.
In a first half trading update
from 11th January, Barratt Developments said the volume of
completions could fall as low as 16,000 in the financial year to June 30,
compared to 17,908 completions last year, if current trends continue – despite
having entered the year with £3.62bn-worth of homes pre-sold.
The £5.3bn-turnover
housebuilder said reservations of new homes had fallen, 57%
down on the same period last year, as mortgage rates soared in the wake of
former chancellor Kwasi Kwarteng’s ill-fated mini budget.
Overall, it said net
reservation rates for the half year from July to end of December had fallen,
44% down on last year, and 36% down on the equivalent period prior to the onset
of the Covid crisis.
In response to the market
downturn, Barratt said it had put a “pause” on recruitment, and reduced site
acquisitions and site openings in order to manage cash outflows. It’s new
approach to land purchasing saw it cancel 22 previously approved land
purchases, which, despite 16 approved land acquisitions in the period, left it
with a net reduction in land bank of 3,293 sites in the first half.
The weak market saw a big
impact on Barratt’s forward sales position, which fell 29% from C15,000 homes
at December 31 2021 to C10,500 by the end of 2022.
Completions in the first half
of the financial year were up 6.9% despite the weak market as the firm
capitalised on the strong forward sales position built up during the
post-pandemic boom period. Barratt said the reservation rate sequentially
slowed over the first half of the year, initially sitting at 0.60 homes per
site per week from July to August 28, then down to 0.48 from then to October 9,
and then down to 0.30 from October 10 for the rest of the year.
The statement said: “The
slowing reservation rate in the first quarter of FY23 reflected the political
and economic uncertainties at that time, particularly around impending cost of
living challenges, coupled with a limited availability of homes for early
occupation given our strong forward order book. The second quarter saw a
material impact from the significant escalation in mortgage interest rates on
both affordability and homebuyer confidence.”
Adapted
from an article in Housing Today 11th January 2023 by Joey Gardiner