Barratt Redrow sees ‘more stable’ property market conditions

Barratt Redrow flagged “more stable market conditions” as the group achieved strong growth in its first trading period following a £2.5bn housebuilding merger.

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

This was 36.7 percent more than the pro forma equivalent of 0.49 recorded during the same period last year, when higher mortgage rates depressed housing demand.

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

It believes the alliance will help address Britain’s significant housing shortage by accelerating the construction of new homes.

The expanded group plans to deliver between 16,600 and 17,000 properties during fiscal 2025, compared to just over 14,000 homes last year, and aims to complete 22,000 homes in the medium term.

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

David Thomas, chief executive of Barratt Redrow, said: “While customer demand remains sensitive to the wider economy, we are starting to see more stable market conditions with greater availability and affordability of mortgages.

“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 strong trading we have experienced in recent weeks.”

The Labor Government has promised to build 1.5 million properties over five years, partly by hiring more planning officers and developing lower quality land in the “grey belt”.

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

Barratt Redrow further announced that it was “confident” of achieving at least £90m in cost synergies from its integration.

It intends to achieve this by streamlining acquisitions, closing nine divisional offices and reducing central and support functions.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: “If operations can be rationalized and new homes are delivered as expected, there is plenty of opportunity for profits to recover in the medium term.”

“But as with any merger, there will be challenges along the way.”

Barratt Redrow shares rose 1.6 per cent to 481p on Wednesday morning.