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What Barratt Developments reveals about UK housing outlook

The UK's largest housebuilder reported a downturn in orders following the closure of construction and sales sites
April 16, 2020

Barratt Developments (BDEV) has given the most clear picture to date of the blow site closures have dealt to home reservations and exchanging activity since the country went into lockdown.

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The UK’s largest housebuilder reported an 11 per cent reduction in the number of homes that had been forward sold and a 12 per cent fall in the value of forward sales between 22 March and 12 April. 

However, the group did manage to deliver 1,349 home completions between those dates and completions for the year to 12 April were 7 per cent higher than the prior year. 

Unsurprisingly, private forward sales – which accounted for almost two-thirds of forward sales by value the day prior to lockdown – have suffered the worst decline, down almost a fifth in terms of value and unit numbers. Affordable forward sales held up better, reducing by only 4 per cent on both measures.

Housebuilders have said they hoped that properties forward sold would help completions bounce back once construction and sales sites are formally reopened. However, not all of the homes included in forward sales figures represent contractual purchasers, but also reservations. A more prolonged economic downturn post-lockdown could mean that fewer of those reservations translate into completions if buyer confidence is weakened or unemployment levels rise.  

Barratt’s stated order book includes purchasers that have reserved a home by paying a relatively small fee, alongside those that have exchanged contracts and paid a deposit on the house. The group declined to comment on what proportion of forward sales constituted reservations or contractual exchanges.

The extent to which the split between home exchanges and reservations within forward sales figures is disclosed varies among the UK’s listed housebuilders. 

“It’s [a question of] how rigorous and how bullish does the company want to be in terms of what number they want to quote,” said Peel Hunt deputy head of research Clyde Lewis. Therefore, for a like-for-like comparison it is much more important to compare the rate of change in each individual housebuilder’s order book over a six-month period, rather than the rate of growth between different groups, he added. 

However, there are some helpful disclosures. Vistry (VTY) reported that forward sales for its housebuilding operations stood at £1.35bn at 25 March, of which £0.9bn had been contracted, while its partnershipsdivision had contracted forward sales of £0.8bn. By comparison, low-cost housebuilder MJ Gleeson (GLE) had 864 forward orders at the start of the month, of which only 42 per cent had been exchanged. That is in addition to 171 completed plots that have exchanged or are ready to exchange.