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The chief executive of Barratt Developments has warned it will be at least two years before the market for new homes recovers as the UK’s biggest housebuilder cuts land buying and pauses share buybacks to preserve cash.
Earnings at the FTSE 100 company have been hit by a slowdown in house sales this year as high mortgage rates dented demand for new homes.
“Nothing we are seeing presently makes us think that in 2025 we will see an increase in volume,” said David Thomas on Wednesday. “You clearly have lower reservation rates but secondly we’re also going to see reducing site numbers,” he added. “If we don’t have sites we are not going to sell homes.”
Barratt said on Wednesday that it would not buy back its own shares for the time being in an effort to preserve cash and weather the property downturn. Last year it returned £200mn to investors. Earlier this year the group also announced that it would significantly reduce land buying as it sought to weather turmoil in the property market.
The housebuilder on Wednesday posted £705.1mn in pre-tax profit for the year to June 30, a fall of nearly 10 per cent compared with the previous financial year.
Barratt built 17,206 homes in the period, 702 fewer than in the previous financial year. It said it had forward sold 49 per cent of its private wholly-owned home builds at the end of August, compared with more than 60 per cent the previous year.
The S&P Global/Cips UK Construction Purchasing Managers’ housebuilding sub-index, a measure of activity in the sector, fell to 40.7 in August, the second-lowest level since May.
Thomas said that the company, which has reduced its headcount by 6 per cent since 2022, will largely maintain a hiring freeze but that it will make exceptions for graduates, apprenticeships and trainees despite recruiting in “reduced numbers”.
Aynsley Lammin, analyst at Investec, said the group’s “cautious” attitude towards preserving cash was “sensible” given the macro-environment backdrop, adding that it would allow it to be reactive with investment when a recovery in home sales came.
The results were broadly in line with market expectations and came after the housebuilder in July posted a sharp drop in demand for new homes in the past financial year. Barratt said at the time that first-time buyers had been hit by borrowing costs and the winding down of the government’s Help to Buy scheme.
The group also slashed its total ordinary dividend to 33.7 pence a share, a 8.7 per cent year-on-year decline.
Shares in Barratt fell 2 per cent in early trading on Wednesday, before recovering slightly in the afternoon.