Barratt Developments (LON:BDEV) said it faced a challenging trading environment in the first six months of its financial year, but raised its guidance for full-year completions due to signs of improvement in the U.K. housing market in January.
In its latest interim results, the U.K.’s biggest housebuilder flagged that consumer confidence weakened “significantly” over the course of the half-year period ended on June 30, as potential homebuyers were driven away by rising mortgage rates and soaring living costs. The net private reservation rate per average week dropped to 0.44, a slip of 44.3% compared to the same timeframe in the prior year.
“Political and economic uncertainty impacted the first quarter which was then compounded by the rapid and significant changes in mortgage rates which reduced affordability, homebuyer confidence, and reservation activity through the second quarter,” Barratt said in a statement.
However, the group added that reservations have seen a “modest uplift” since the start of January thanks to hopes for a decline in energy costs and expectations that the Bank of England will eventually ease off of a recent slew of aggressive interest rate hikes aimed at cooling red-hot inflation.
As a result, Barratt and its joint ventures now expect to deliver total home completions of between 16,500 to 17,000 for the 12 months to June 30, down from 17,908 units in the previous fiscal period, although this guidance is dependent on how selling evolves over the spring season. Last month, the company said it saw the figure in the range of 16,000 to 16,500.
In the first half, total completions grew by 6.9% year-on-year to 8,626.
Revenue during the period also increased by nearly a fourth to £2.78 billion (£1 = $1.2059), in line with Bloomberg consensus estimates. Meanwhile, adjusted operating profit from operations rose to £511.8 million, which Barratt said was a reflection of higher completion volumes and a step-up in average selling prices.