Reuters
Published Oct 12, 2022 07:13
Updated Oct 12, 2022 12:08
By Aby Jose Koilparambil
(Reuters) -Britain's largest homebuilder Barratt Developments (LON:BDEV) warned of a fall in annual profit on Wednesday following a plunge in reservations in recent weeks as a deepening cost-of-living crisis and soaring mortgage rates hit the housing market hard.
The stock fell as much as about 9% to 313.5 pence in morning trading, its lowest level since mid-2016, when Britain's vote to leave the European Union battered the housing market.
Barratt forecast adjusted profit before tax for this financial year that was in line with market expectations of around 972.5 million pounds ($1.07 billion), down from the record 1.05 billion pounds it reported for the year ended June.
It said net private reservations per average week fell to 188 from July 1 to Oct. 9, from 281 in the same period of 2021, hurt by the cost-of-living crisis and made worse by higher mortgage rates and reduced mortgage availability.
British housebuilders, who have benefited from strong house prices and government support measures during the pandemic, had so far underscored a resilient market and robust demand despite signs of cooling and warnings from analysts of a downturn.
But in recent weeks, mortgage rates have risen sharply after the UK government's plan for billions of pounds of unfunded tax cuts spooked financial markets.
"The outlook for the year is less certain with the availability and pricing of mortgages critical to the long-term health of the UK housing market," Barratt said in a statement.
Shares in other top builders including Persimmon (LON:PSN), Taylor Wimpey (LON:TW) and Berkeley fell by between about 3% and 5%.
"The market has been expecting bad news from the housebuilding sector and now we’ve got it," said AJ Bell analyst Russ Mould.
"There are growing fears that property prices are going to fall as mortgage rates shoot up and fewer people can afford to buy a house or flat," said Mould.
The FTSE-100 company, which last month announced a 200 million pound share buyback, said total forward sales stood at 13,314 homes worth 3.60 billion pounds, as of Oct. 9, compared with 15,393 units valued at 3.94 billion pounds a year earlier.
"A deterioration in the affordability of mortgages, especially for first time buyers, is just about the biggest spanner that could be thrown at the builders," said Hargreaves analyst Sophie Lund-Yates.
($1 = 0.9047 pounds)
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.