Big Drop In House Building Volumes as mortgage affordability bites

Two prominent UK house builders have warned of sharply reduced volumes in the next year or so as buyers struggle to find affordable mortgages.

The UK’s largest house builder - Barratt Developments - says forward sales dropped to 9,221 in the three months to October 8 from 13,314 for the same period in 2022; forward sales are £800m down at £2.4 billion.

Barratt expects to deliver total home completions of between 13,250 and 14,250 homes in the full year of 2024, including some 650 home completions from its Joint Ventures and circa 750 completions for Build To Rent. 

“We have continued to focus on driving revenue through multi-unit sales to the private rental and affordable housing sectors and the continued use of sales incentives for private customers. Whilst we expect that the backdrop will continue to be difficult over the coming months, we are a resilient business with a strong balance sheet and a highly experienced management team” says a spokesperson for the company.

Meanwhile another major house builder - Bellway - says it expects to complete a third fewer homes this year than in 2022, directly as a result of falling customer demand because of mortgage affordability issues.

Bellway is targeting to deliver completions of around 7,500 homes in this financial year, down from 10,945 homes in the previous year, but warns: “Final volume outturn will depend on the trajectory of mortgage interest rates and the strength of demand in the autumn and spring selling seasons”.

The nine weeks since August 1 have seen private sales fall 29 per cent year on year, with reservations down 30 per cent and orders down a hefty 36 per cent.

It’s seen a 3.7 per cent drop in revenue to £3.4 billion and an 18.1 per cent fall in profit before tax to £532.6m. But it insists it’s got a strong balance sheet with year-end net cash for £232m and a high-quality land bank comprising 98,164 plots.