BARRATT Developments yesterday highlighted slowing growth in the Scottish housing market, flagging the effects of “rapid and significant changes in mortgage rates” and political and economic uncertainty on its business north of the Border and elsewhere in the UK.

Chief executive David Thomas flagged a “marked slowdown” in the overall UK housing market, as Barratt said it had paused the recruitment of new employees and revealed a significant reduction in land purchases.

The net number of private reservations for houses per week was 155 for the six months to December 31, down from 259 in the same period of the previous financial year.

Doug McLeod, managing director of Barratt Developments Scotland, highlighted the strength of trading in the six months to December and continuing growth in timber-frame production following the acquisition of Selkirk-based Oregon Timber Frame, while acknowledging slower growth in the housing market north of the Border.

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He said: “The last six months of the year were strong for Barratt Developments in Scotland, thanks to our significant forward order book at 30 June 2022, the efforts of our employees, sub-contractors and supply-chain partners.”

Mr McLeod added: “Further investment in Oregon Timber Frame, which we acquired in 2019, saw the creation of 40 new jobs – taking us to a total of 70 new roles created in the past three years as part of Barratt’s long-term goal to increase its use of modern methods of construction offsite.”

He declared that Barratt Developments Scotland had been “proud” to launch 16 new sites in 2022.

Mr McLeod noted that a further five sites were due to launch in the first half of 2023.

However, he added: “Despite these successes, the first half of the financial year has seen growth slow in the Scottish housing market.”

He declared that “as we head into 2023, our business in Scotland remains fundamentally strong”, echoing the comments of Mr Thomas about the overall group.

Mr McLeod and Mr Thomas observed political and economic uncertainty impacted the three months to September, declaring “this was then compounded by rapid and significant changes in mortgage rates which reduced affordability, homebuyer confidence and reservation activity through the second quarter” of the financial year, which runs to June.

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The Bank of England has raised UK base rates from a record low of 0.1 per cent in December 2021 to 3.5%.

Barratt 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.”

It added: “The outlook for the second half of FY23 is uncertain with homebuyer confidence and the availability and competitive pricing of mortgages critical to the health of the UK housing market in the coming months…

“We have taken a number of actions to respond to current market conditions, including significantly reducing land approvals, pausing recruitment of new employees and introducing further controls for new site openings to manage our working capital deployment. Reservation activity in the first quarter of the new calendar year will determine whether any further action will be required.”

Barratt declared that its full-year out-turn would “depend on how the market evolves in the early months of 2023”.

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It added that, assuming net reservation rates increased in line with normal spring trading patterns to around 0.5 homes per active outlet per week, it would remain on track to deliver the consensus forecast of total home completions of 17,475. However, it added that, should the usual seasonal improvement not occur and if trading were to remain at recent levels, it would deliver total home completions for the financial year to June in the range of 16,000 to 16,500.

Barratt’s average selling price for houses in the six months to December was up sharply on the same period of the previous financial year. However, this was partly the result of a greater proportion of its house sales being in London.

The housebuilder said its total average selling price in the six months to December was up by around 14.6% on the same period of the prior financial year at about £330,000, flagging “a positive mix impact, an increased proportion of London completions and underlying house price inflation”.

Reflecting on its land purchase activities, it added: “Throughout the period we have been very selective with respect to the land opportunities on which we have been prepared to bid, reflecting the increased uncertainty on the outlook for both the UK economy and the housing market.

“As a result of our continuing rigorous application of minimum investment hurdles to new land approvals, as well as the cancellation of some previous land approvals, which are no longer proceeding, net land approvals in the period have been negative.”