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Britain’s leading housing construction company, Barratt Developments, issued a cautionary statement indicating a significant reduction in the number of homes it plans to build in the current fiscal year. This decision was influenced by the impact of increasing mortgage rates and persistent inflation, which have adversely affected the demand for housing.
According to Barratt Developments, their projected home construction for the period ending June 30, 2024, is estimated to range between 13,250 and 14,250 units. This forecast represents a notable decrease from the previous year’s figure of 17,206 homes. Building homes within the midpoint of this range would result in a decline of approximately 20%.
The housing market In Britain is facing challenges due to the rapid escalation of interest rates. Analysts predict that these rates may climb to 6.25% by the end of the year, compared to the current rate of 5%, thereby creating additional strain for homeowners and potential buyers. Recently, average two-year fixed mortgage rates reached their highest point in 15 years.
Barratt, acknowledging the significant impact of macro-economic factors such as persistent inflation and elevated interest rates, stated that reservations experienced a decline beyond the usual seasonal patterns from mid-May until the end of June.
Homebuilders usually adjust their home-building goals to align with the prevailing levels of demand. Berkeley, a luxury homebuilder, recently predicted a 20% decrease in house build sales for the current fiscal year. Barratt’s forward sales position, which serves as a crucial measure of housing demand, declined to £2.22 billion ($2.89 billion) as of June 30, compared to £3.62 billion in the previous year. The company anticipates that its adjusted profit before tax for fiscal year 2023 will be consistent with the current situation.
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