Shares in the FTSE 100 builder dropped 2.4 per cent in morning trade, also dragging down the housing sector index nearly 2 per cent
UK’s biggest housebuilder Barratt flagged hard trading conditions and further margin decline over the coming months after it posted an annual profit drop on Wednesday, as high mortgage rates continue to hit demand.
Shares in the FTSE 100 builder dropped 2.4 per cent in morning trade, also dragging down the housing sector index nearly 2 per cent.
Affordability concerns fuelled by high mortgage rates and an extended cost-of-living crisis have weighed on the UK housing market, with indicators on everything from mortgage demand to construction rates and prices slipping in recent months.
British house prices in August were down 5.3 per cent compared to a year back, their largest annual drop since July 2009, mortgage lender Nationwide said on Friday.
With higher mortgage rates and the level of uncertainty, it becomes a recipe for the FTB to decide not to buy, therefore to continue to rent instead of moving on to the housing ladder, Chief Executive Officer David Thomas told Reuters.
Barratt said it expected average sales sites to drop by nearly 6 per cent in the current fiscal and also revised its dividend cover to 1.75 times, for fiscal 2024, from 2 times announced during half-year results in February.
The uncertain outlook is reflected in the shareholder return announcement. There will be no further share buybacks over the coming period, while the dividend has also been decreased, Richard Hunter of interactive investor said in a note.
The firm said forward sales sat at 2.44 billion pounds as of August 27, 36 per cent lower YoY.
Barratt, which didn’t provide profit guidance, predict a drop in margins and the CEO said that the hiring freeze announced in 2022 would continue until the market conditions change drastically.