…By Henry George for TDPel Media.
UK housebuilder Barratt Developments announced that it will meet City profit expectations, and sales have increased.
This news supports the idea that the residential market in the UK is recovering after facing challenges from September’s mini Budget and a cost of living crisis that reduced demand.
The company’s trading was impacted like its rivals, but in February, Barratt reported early signs of recovery in reservation rates.
CEO David Thomas announced that despite a difficult economic backdrop, the company has maintained positive sales rates and is fully forward sold for the financial year 2023.
The company’s pre-tax profits for the year to June are expected to meet City forecasts of £876.8 million.
Reservation Activity Reflects a More Challenging Backdrop for First-Time Buyers
Barratt’s trading update for January to April 23, reveals that reservation activity has declined for first-time buyers, reflecting the challenging economic backdrop.
However, demand has remained resilient among existing homeowners due to limited homes for sale in the wider market, the energy efficiency of new homes, and significant rental cost growth.
The company has fully forward sold its full-year order book to June, which stood at £3 billion as of April 23.
This figure is substantially down on the £4.5 billion recorded a year earlier.
Completed home sales for the full year are expected to be between 16,500 and 17,000, down from nearly 18,000 in the year to June 2022.
The Government Examines Proposals to Resurrect Help to Buy
The slump in sales is attributed to the sharp reduction in reservations in the final quarter of 2022 and the closure of Help to Buy.
The government is examining proposals to resurrect Help to Buy, and companies like Barratt will be waiting to hear about any developments.
Analysis and Commentary
Barratt Developments’ announcement that it will meet profit expectations is excellent news for the company and the UK residential market, which has experienced a decline in sales due to the economic challenges it faced.
The company’s positive sales and forward sold orders indicate that the market is beginning to recover, which is a promising sign.
The decline in completed home sales for the full year is concerning, but it is not unexpected given the challenges faced in the sector.
The increase in demand among existing homeowners and the decline in reservations for first-time buyers highlight the need for more affordable housing in the UK.
While Barratt’s new homes are energy efficient, significant rental cost growth indicates that renting is becoming less affordable, and homeownership remains a more attractive option for many people.
The government’s examination of proposals to resurrect Help to Buy is a positive sign, as the scheme has helped many first-time buyers to get on the property ladder.
Barratt Developments’ announcement is good news for the UK residential market, and the positive sales rates and forward sold orders indicate that the sector is recovering.
However, there is a need for more affordable housing in the country, and the government’s examination of proposals to resurrect Help to Buy is a step in the right direction.