UK's Barratt flags up to 7% drop in 2025 homebuilding targets amid tough market

By Aby Jose Koilparambil

(Reuters) -Britain's Barratt Developments expects its homebuilding targets for fiscal 2025 to drop by up to 7% as elevated mortgage rates and broader economic concerns hold back a housing market recovery.

Shares in the FTSE 100 housebuilder were down 3% at 475.80 pence at 0756 GMT, the top percentage loser on the blue-chip index.

The housing sector is betting on a dynamic shift in homebuilding policy under the new Labour government, mainly to tackle planning-related issues, as a delay in interest rate cuts has tempered hopes for a fast-paced recovery.

Barratt, one of the biggest homebuilders in the UK in terms of output and revenue, said it expects to build 13,000-13,500 homes in the year through June 2025, including 600 units from joint ventures. The group said it built 14,004 homes in the year ended June 30, at the upper end of its forecast range.

Britain's new finance minister Rachel Reeves on Monday pledged to tackle a chronic shortage of new homes, saying the government would restore mandatory housebuilding targets for local authorities, fund the hiring of more planning officers and accelerate development of large green energy projects.

Barratt said it expects to see a reduction in average outlets, or sites doing sales, in the current year, but was confident that the numbers would grow into 2026 fiscal year.

Forward sales - a key industry metric which gauges housing demand in the near term - stood at 7,239 homes, including joint ventures, as of June 30, down from 8,995 units a year earlier.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said in a note that further easing of mortgage rates would be necessary for activity to pick up significantly in the housing sector.

Barratt also forecast profit slightly above its expectations for the 2024 fiscal year.

Analysts on average expect adjusted profit before tax for the year ended June 30 at 357 million pounds ($456.8 million), according to LSEG data. That is an about 60% slump from 884.3 million pounds reported for the prior year.

Barratt's FTSE 100 peers Taylor Wimpey and Persimmon have warned of subdued market conditions this year, while Vistry on Tuesday forecast a 7% rise in half-year profit, thanks to strong demand for its affordable homes.

In February, Barratt agreed to buy smaller rival Redrow in an all-stock deal valuing it at about 2.52 billion pounds.

($1 = 0.7815 pounds)

(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Rashmi Aich and Bernadette Baum)