HOUSEBUILDER Barratt saw its shares slide more than five per cent as it flagged a “less certain” outlook.
It told the City a decrease in reservations “reflects customer response to increased wider economic uncertainty”. One analyst said the results showed that “government policy missteps can affect not just the financial markets but the real economy”.
The London-listed firm, which has sites across Scotland, told shareholders that pre-tax profits and home completions are set to be in line with expectations despite market uncertainty.
The company reported 188 private reservations per average week over the period from July 1 to October 9, falling from 281 over the same period last year, describing the outlook for the year as less certain amid rising interest rates.
The group said the lower reservation rate comes as “growing cost of living concerns have been compounded by increased mortgage interest rates and reduced mortgage availability”.
Barratt said it has limited availability of homes for early occupation given the strength of forward order book and it also noted the expected reduction in Help to Buy activity, which accounted for 12% of private reservations in the period, against 21% last year.
READ MORE: Barratt posts record profit but warns on interest uncertainty
It launched 25 new developments in the period, against 27 the year before, and operated with an average of 351 active outlets, compared to 338 last year, while the company continues to expect to deliver average sales outlet growth of around 3% for the full year. Barratt delivered 3,608 home completions, against 3,699 in the same period the year before.
Barratt said in the update: “Based on our completions to date, our strong forward order book and current market conditions, we now expect wholly owned completions to be in line with those reported in full-year 2022."
Russ Mould, AJ Bell investment director, said: “If government ministers needed any evidence of how policy missteps can affect not just the financial markets but the real economy, then Barratt Developments’ first quarter results statement provided it in spades.
“Barratt cites increased wider economic uncertainty thanks to the knock to consumers’ confidence and pockets from the increased cost of living, higher interest rates and also a reduction in mortgage availability.
“All three factors bear the fingerprints of both the Government and the Bank of England and the drop in mortgage availability is a direct result of the financial market fall-out which followed the Chancellor’s botched fiscal event of September 23.”
He added: “Affordability was already a problem before the demise of Help to Buy, which supported just 12% of sales in the opening quarter of the year.
“The Government’s proposed changes to stamp duty land tax and 95% mortgage guarantee scheme are designed to help here, but what is really needed is an increase in supply of dwellings that would-be buyers can actually afford.”
David Thomas, chief executive of Barratt, said: “We continue to see strong levels of interest across the country, however private reservations remain below the level seen in full-year 2022 as customers react to the wider economic uncertainty.
“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.
“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.”
Shares in Barratt closed down 17.6p, or 5.13%, at 325.4p.
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