Labour's ambitious housing targets have faced a significant setback, as one of the UK's largest developers, Barratt Redrow, announced a 12 percent decrease in new homes sold over a 17-week period. The company reported selling 3,223 properties in the 17 weeks leading up to October 25, a drop of 442 units compared to the same period last year.
Chief Executive Dean Banks attributed the decline to "challenging market conditions" and persistent "pressure on affordability," which are hindering prospective buyers' ability to secure mortgages and raise deposits. This downturn directly affects Labour's commitment to building 1.5 million new homes within the current parliamentary term.
The Office for Budget Responsibility has revised its projections, now anticipating 1.14 million new homes by 2031, a reduction of 190,000 from previous forecasts. This revised figure is also lower than the 1.18 million homes built in the five years between 2019 and 2024, a period that included the pandemic-induced closure of construction sites.
While the government has introduced the "Your First Home" scheme to assist first-time buyers with a 2.5 percent deposit loan, its rollout has been postponed until April of the following year. Barratt Redrow offered a cautious response, stating, "Whilst we welcome the introduction of Your First Home to support housing delivery over time, it is too early to assess its impact on first-time buyer activity."
Housebuilders are grappling with escalating costs, exacerbated by global events and domestic policies including tax increases and regulatory burdens. Simultaneously, rising mortgage rates are making homeownership increasingly inaccessible for many.
Several major housebuilders, including Taylor Wimpey and Berkeley Group, have already scaled back their development plans or halted new land acquisitions in key areas like London due to the unviability of new projects. Barratt Redrow's shares saw a slight increase of around 1 percent following the update, as the company maintained its financial guidance for the year, though the stock remains down approximately 15 percent year-to-date.
Investment director at AJ Bell, Russ Mould, noted that while the market reacted with relief to Barratt Redrow maintaining its guidance, these targets might be "built on shaky foundations." He pointed to reduced reservation rates in the private market, offset partially by institutional buying for the rental sector, and indicated that margins are likely to remain under pressure due to rising input costs. Mould added that while Barratt's order book is robust and its balance sheet strong, the company, like the wider industry, is awaiting an improvement in the inflationary and interest rate environment.