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Barratt raises more fears about property market

Barratt raises more fears about property market

Wednesday, 14 May 2008 10:38 AM

Property developer, Barratt Homes has said this morning that the housing market has "deteriorated significantly".

It blames the decline in the new housing development on "an unprecedented reduction in mortgage availability and tightening lending criteria, combined with a decline in consumer confidence."

While the house builder said it made a relatively encouraging start to the year, March - when some believed a recovery in the credit markets might begin - had shown a sharp decline.

Total housebuilding revenues for the 19 week period to May 11th 2008 were £825 million compared to prior expectations of £893 million, a decrease of 7.6 per cent.

Meanwhile reservations per week averaged 276 over the period - an uplift of 13.1 per cent compared to 244 for the first half of the financial year, but down 33.6 per cent against expectations for the year.

There had also been a significant fall in reservations per week since the end of March, the developer said, with an average of 206 over the last 6 weeks. Cancellation rates since the beginning of the calendar year have run at approximately 25 per cent, broadly in line with the medium term average, although Barrat said it had seen an increase in cancellations over the last six weeks.

Current market conditions were also impacting to varying degrees on regional performance, with the Midlands and West worst affected, while the London and South East markets are proving to be relatively more resilient.

But it warned new development sites were only being started on a highly selective basis where it had "clear visibility of demand and where work-in-progress can be particularly tightly controlled."

"Overall, we expect the number of sites to decline in the next financial year," it added.

Mark Clare, group chief executive said: "We do not expect to see a meaningful upturn in the housing market until there are improvements in the availability of mortgage finance. We do, however, continue to believe the medium-term outlook remains strong given the restricted supply of housing in the UK."

The news follows housing minister Caroline Flint's gaffe yesterday in which her briefing notes were captured by photographers waiting outside 10 Downing Street. Among the notes were details of the decline in new build property developments which were already estimated to be 10 per cent down compared to a year ago.