Barratt Developments PLC (LSE:BDEV) will clarify whether it is indeed “fundamentally strong” in the UK’s slowing housing market when it provides the outlook alongside half-year results.
Rival housebuilders Redrow PLC (LSE:RDW) and Bellway PLC (LSE:BWY) will also provide updates next week, on Thursday, all of which comes amid tumbling mortgage lending numbers.
Barratt, Britain's biggest housebuilder by sales, confirmed last month that house completions had risen 7% to 8,626 in the six months to December, up from 2021’s 8,067, although sales rates and orders were down 44% and 29% respectively.
Despite the falls, Barratt suggested it was “fundamentally strong,” and that its “full-year out-turn will depend on how the market evolves,” after economic uncertainty and higher interest rates lowered demand throughout the last year.
But Barratt had revealed the “first cracks” in its update, said Hargreaves Lansdown analyst Sophie Lund-Yates, adding its outlook will be the key feature in its upcoming results.
“The entire construction industry has been facing high material and labour costs since last year, which chips away at profitability,” she added.
With the dark clouds over the UK economic landscape, there could be a market reaction if news is worse than expected, Lund-Yates said, but very dramatic downward moves are unlikely “because a lot of nervousness is already priced in”.
Analysts at Liberum recently rated all companies in the newbuild sector as ‘buys’, despite the economic downturn, highlighting a lack of new housing and few signs people were being forced to sell only suggest “mild” future price falls, while Barclays said investors should temper their expectations for the time being.