Barratt Developments has reported a sharp fall in sales as it warned the outlook for the market remains uncertain sending shares in the group plunging.

Barratt said the value of forward sales made by the group fell by 34% to £2.36 billion at October 8, from £3.6bn at the equivalent point last year following a marked drop in the reservation rate.

The slowdown reflects the impact of the sharp increases in mortgage rates imposed by lenders in recent months. These followed moves by the Bank of England to raise its key base rate in a bid to tackle surging inflation.

Rises in the prices of essentials such as food and energy combined with increases in borrowing costs to trigger a cost-of-living crisis.

While there are signs that inflationary pressures are easing, Barratt Developments chief executive David Thomas indicated that the group expects conditions to remain difficult for some time.

In an update on trading from July 1, Barratt Developments said: “The outlook for the year remains uncertain with the availability and pricing of mortgages critical to the long-term health of the UK housing market.”

On Tuesday the rival Bellway business said it was braced for a near 30% drop in sales.

READ MORE: Housebuilding giant faces sales slump as mortgage rises hit demand

Bellway said it is targeting completion of 7,500 homes in the current period, down 31 per cent from 10,945 in the last financial year.

Bellway posted a £532 million profit before tax and one-offs for the year ended July 31, down around 18% on the £650m achieved in the preceding year.

Barratt Developments and Bellway both have significant operations in Scotland

In September Scottish housebuilder Springfield Properties reported “significantly lower levels of reservations in private housing”.

Noting the impact of continued high interest rates, mortgage affordability and reduced homebuyer confidence Springfield said its board did not expect conditions to materially improve before Spring 2024.

Barratt Developments said yesterday that it will try to boost sales through “targeted use of incentives” while continuing to manage build activity and to control its cost base.

READ MORE: Poverty crisis in Scotland to deepen warns former prime minister

In 2019 the group bought Selkirk-based timer frame business Oregon as part of moves to help speed up and standardise the build process.

It will pursue a “highly selective” approach to buying land.

Barratt Developments reckons it is well placed to cope with tough conditions. “We are a resilient business with a strong balance sheet and a highly experienced management team,” it told investors. 

The group said it secured 169 net private reservations per average week from July 1 to October 8, against 188 in the comparable period last year.

It noted: “We continue to expect to deliver total home completions of between 13,250 and 14,250 homes in FY24.”

Last month Barratt Developments said the number of home completions fell by 4% in the year to June 30, to 17,206 from 17,908. This reflected the market slowdown experienced from September 2022.

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The group posted £705m pre-tax profit for the year, up around 10% from £642m in the preceding period.

It added: “When the market slowdown accelerated following the mini budget in late September 2022, we implemented a recruitment freeze which has already reduced our headcount by 6% from 30 September 2022 through to 30 June 2023.”

In August Doug McLeod, regional managing director for Barratt Developments Scotland, highlighted the impact the cost of living crisis was having on the market.

Mr McLeod said Barratt Developments had launched support schemes for people who wanted to invest in property including mortgage contributions and deposit help for first time buyers.

The Tackling the Cost of Living Crisis 2023 report for the company found a third of people surveyed were considering buying with a friend or family member, while 44% were thinking about buying an apartment rather than a house to save money.  

READ MORE: The cost of living crisis is changing how people buy homes

Shares in Barratt Development closed down 5%, 21.8p, at 402.1p.