How tough is life going to get for housebuilders? A first clue should come next week when Barratt Developments PLC (LSE:BDEV) publishes its trading update covering July to October on Wednesday.
Shares in the FTSE 100 housebuilder are trading at around six-year lows on concerns over consumer confidence, rising mortgage rates and their general availability.
Peel Hunt expects sales across the sector to drop sharply in the wake of the pulling of mortgage deals following the mini-Budget with Barratt to be affected alongside its peers.
Existing forward sales will largely proceed, said the broker, as these should all be backed by mortgage offers at lower rates than currently available, but the real crunch will be over the next couple of months.
Barratt’s forward sales will be affected, Peel Hunt believes, as buyers pause to get some clarity on what they will have to pay on their mortgages and what sort of pay rises and other offsets such as income tax cuts and energy payments come their way.
“Hopefully Barratt has paused land buying, and if so, the group should begin throwing off a lot of spare cash,” analysts said.
Peel Hunt predicts full-year revenues of £5.8bn and adjusted profits of £1.03bn for the year to June 2023.
Other numbers to watch for are slippage on the company’s housing completions target of 18,400 to 18,800 (2022: 17,908) and the net reservation rate, which has already started to turn down.