A heightened interest in new-build properties is boosting the UK’s housing market recovery, with Barratt reporting an increase in sales and reservations.
The new-build market in the UK is a hugely important part of the property sector, increasingly so because of the country’s growing focus on improving the energy efficiency of the built environment, as well as a shortage of housing in many parts of the UK compared with demand.
In recent months, the construction sector has shared mixed results, but some new data from Barratts – one of the UK’s biggest housebuilders – shows some positive trends emerging that could support the sector.
It revealed that, over the past 12 weeks, reservation rates have increased to 0.71, showing an improvement from January’s low figure of 0.3. This is still down on the 0.93 figure recorded this time last year, but shows a boost in interest in the new-build market as the year progresses.
Catering for a wide market including first-time buyers, families and more, Barratt believes that, thanks to the latest figures, it is on track to hit its annual profit outlook while retaining its target for new-build completions this year.
Build cost inflation is a hurdle
David Thomas, chief executive at Barratt, said: “We are pleased that more positive sales rates have been maintained through this period and … we expect to deliver full year adjusted profit before tax in line with current market expectations.”
The company’s year-to-date forward sales, which indicate the current market interest and demand, is £2.95bn, according to the report, which is up from £2.67bn in January. However, it is still down by 34.4% compared with the same month in 2022.
Barratt’s new-build completions target stands at 16,500-17,000, which is up from the 16,000-16,5000 it had originally forecast at the start of this year.
Thomas also commented on build cost inflation, saying it would be around 9-10% for the year-end to June. However, the company expects this to fall to around 5% later in the year, which will provide a further, welcome boost to the new-build and construction sector.
He added: “In February, we reported early signs of recovery in our reservation rates following the exceptionally challenging trading conditions experienced at the end of 2022.
“While the economic backdrop remains difficult, we are pleased that more positive sales rates have been maintained through this period and we are now fully forward sold for FY23.”
What’s holding the new-build market back?
Regulatory compliance requirements, as well as materials and staff shortages are all factors that many construction companies and housebuilders are having to deal with at the moment, which is affecting build rates for many.
Barratt has adjusted its construction activity to the slower trading backdrop, with 303 equivalent properties built per week, which is 16% below the 359 build rate seen during the same period last year.
Arguably, the UK’s new-build sectors is one of the most crucial facets of the housing sector at the moment, and this point was recently put forward by Craig Hall, director of LSL New Homes Financial Services. Particularly in light of soaring energy costs, new-builds can provide crucial savings.
New-builds can save an average £2,000 in energy bills per year, according to some reports, and this could be even more if energy bills go higher, which could make a huge difference to many households.
Borrowing, too, is becoming more expensive, and increasing the number of lender incentives and ‘green mortgages’ in the sector could be another benefit to new-build owners, and encourage more people to consider investing in new-builds as an additional benefit.
Leeds Building Society, points out Hall, is one lender than has “improved its affordability assessment for new-build properties, allowing homebuyers to borrow more for an energy efficient new-build home than for a less energy efficient property.”