Barratt Redrow eyes ‘extra secure’ housing market situations

Barratt Redrow flagged ‘more stable market conditions’ as the group delivered solid growth in its first trading period after a £2.5billion housebuilding merger.  

The Leicestershire-based housebuilder, a recent merger of rivals Barratt Developments and Redrow, recorded a weekly net private reservation rate per active outlet of 0.67 between 22 August and 13 October.

This was 36.7 per cent up on the pro-forma equivalent of 0.49 recorded over the same period last year, when higher mortgage rates depressed housing demand.

Good signs: Barratt Redrow said it was noticing ‘more stable market conditions’

Barratt Developments completed the £2.5billion acquisition of Redrow on 22 August, having originally agreed the purchase in February and received clearance from the Competition and Markets Authority.

It believes the tie-up will help address Britain’s significant housing shortage by expediting the construction of new dwellings.

The enlarged group anticipates delivering 16,600 to 17,000 properties during the 2025 fiscal year, compared to just over 14,000 homes last year, and is targeting 22,000 home completions in the medium term.

Inflation and mortgage rates in the UK have eased significantly this year, sparking optimism among housebuilders that trade is recovering.

David Thomas, chief executive of Barratt Redrow, said: ‘Whilst customer demand continues to be sensitive to the wider economy, we are beginning to see more stable market conditions with increased mortgage availability and affordability.

‘It will take some time for customer confidence to fully recover from the macroeconomic headwinds faced over the past two years, but we are encouraged by the solid trading we have experienced over recent weeks.’

The Labour Government has vowed to build 1.5 million properties over five years, partly by hiring more planning officers and developing on lower-quality’ grey belt’ land.

Only 183,610 new homes were completed across the UK in the 12 months to March, according to Office for National Statistics figures.

Barratt Redrow further announced it was ‘confident’ of achieving at least £90million in cost synergies from its integration.

It intends to attain this by optimising procurement, closing nine divisional offices, and reducing central and support functions.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: ‘If operations can be streamlined and new homes delivered as expected, there’s plenty of opportunity for profits to rebound over the medium term. 

‘But as with any merger, there will be challenges along the way.’

Barratt Redrow shares were 1.6 per cent higher at 481p on late Wednesday morning.