Barratt Developments is Britain’s largest housebuilder and has imposed a freeze on hiring. It also plans to “significantly” reduce its purchase of land, as it prepares for another slump in the UK housing sector.
Barratt stated that it was responding to a slowdown in UK housing markets due to an increase in interest rates, which made mortgages more expensive for potential homebuyers.
According to the company, the average weekly net number private properties reserved fell from 259 to 559.
The building plans for 3,293 plots of land were also cancelled, thereby cancelling the 3,003 parcels that had been constructed. This net cancellation of 290 plots is compared to the net addition of 8,869 one year earlier.
David Thomas, Barratt’s chief executive said that the first half of the financial years had seen a slowdown in UK housing markets.
“Political uncertainty and economic uncertainty affected the first quarter. This was further compounded by significant and rapid changes in mortgage rates that reduced affordability, homebuyer confidence, and reservation activity throughout the second quarter.”
Barratt warns that the outlook for 2023’s first half is “uncertain”, and that the health of the UK’s housing market will depend on homebuyer confidence, as well as the availability of affordable mortgages.
In response to the rising UK interest rates which have risen nine times in the last year, lenders have increased mortgage borrowing costs. In the aftermath of September’s government’s disaster mini-budget, lenders increased mortgage rates. This was due to market turmoil that caused some lenders to withdraw their mortgages and others to raise borrowing costs.
The turmoil has caused homeowners to have higher costs when they remortgage their properties. This has also depressed the appetite of homebuyers who are now seeing a drop in house prices throughout the UK.
Halifax, part of Lloyds Banking Group in the UK, reported last week that in December the average house price in the UK had fallen for the fourth consecutive month.
The lender forecasted that rising interest rates and a wider cost of living crisis would reduce house prices by around 8% over 2023.
The construction industry has already been affected by rising interest rates. In December, it contracted as housebuilders took on fewer jobs.
Barratt stated that the group is still in a strong financial situation. The company stated that this gives them a solid platform and allows them to adapt to changing market conditions throughout the year.
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