Housebuilding giant Barratt Developments has underlined the scale of the challenge facing the new UK Government as it aims to secure a huge increase in the number of new homes built in the country.
Barratt said the number of homes it expects to build could fall by up to 7% in the current year although new Chancellor Rachel Reeves has said the new government will act swiftly to address a chronic shortage of homes. This serves as a block on growth in the UK.
Promising to get Britain building again, Ms Reeves this week highlighted the need to simplify the planning system, which is seen as a major obstacle by housebuilders.
READ MORE: Labour plays SNP Government game with energy revolution hype
While planning is a reserved matter, builders in Scotland have complained about the system for years. Barratt is a significant player in Scotland.
Barratt said reform of the planning system was key to tackling the undersupply of new homes but also underlined the significance of other factors that could weigh on activity for some time.
The company said completions in the current year are expected to fall to 13,000 to 13,500 annually, from 14,004 in the year to June 30.
The expected fall in completions reflects the impact of increases in mortgage rates that followed moves by the Bank of England to tackle the surge in inflation amid the recovery from the pandemic.
The bank raised the official rate from 0.1% in December 2021 to 5.25% in August 2023 under an initiative that triggered a downturn in the housebuilding market.
While the inflation rate has returned to target, hopes that the bank would cut interest rates quickly have been dashed.
READ MORE: Sainsbury's claims success in grocery wars as inflation fall boosts sales
Barratt said: “The macro backdrop remains challenging, particularly demand sensitivity to current mortgage pricing and availability.”
The expected fall in completions also reflects the fact that Barratt cut land-buying activity from September 2022 amid the slowdown triggered by the Bank of England’s action.
Barratt said yesterday that total home completions fell by 18.6% in the year to June 30, from 17,206 in the year to June 2023. The total average selling price fell to £307,000 from £319,600.
READ MORE: Plans for major North Sea windfarm advance
However, the company said it had delivered a strong operational performance in what has been another challenging year.
Noting it has cash in the bank, Barratt said it expects to increase spending on land and the number of sales outlets in the current year without specifying by how much.
Barratt is set to participate in a wave of consolidation that is sweeping the sector as builders look to add scale. It has agreed to a merger with Redrow, which is subject to approval by competition authorities. What such deals will mean for total sector activity levels is unclear.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here