UK housebuilder Barratt Developments may build fewer homes after Brexit

Britain’s biggest housebuilder Barratt Developments said it might slow the pace of construction and rethink its land buying programme to prepare itself for an expected slowdown sparked by the vote to leave the EU.

Britain’s property sector has been one of the worst hit since the June 23 referendum, with Barratt and other housebuilders seeing their market values plunge while investors pulled out cash from commercial funds, forcing many to be suspended.

Shares in Barratt, which were down over 2.5% yesterday, have lost almost 29% of their value since the vote. Estate agency Foxtons has said Brexit is likely to result in a drop in its full-year earnings.

Barratt, which posted a 5% rise in the number of homes it built in the year to the end of June, to 17,319, said it was now taking steps to reduce its risk ahead of a potential fall in demand. Barratt chief executive David Thomas said the market was now more likely to slow.

“We would look at future land commitments, our current commitments, we would also look at our build programmes and the extent to which we should slow down our build programmes,” he told Reuters.

“The principal focus of our reassessment will be about where we have approved land but we have not yet submitted for planning or alternatively where land is coming to the market that we could bid on and we are looking at whether we will or we won’t,” he said.

Barratt said its full-year pre-tax profit is expected to increase by around 20% to roughly £680m (€817m), in line with expectations.

Before the Brexit vote, British households’ demand for mortgage lending and consumer credit picked up significantly, central bank data showed yesterday, underscoring the consumer-led nature of British economic growth.

The Bank of England’s quarterly survey of lenders showed demand for mortgage lending in the second quarter rose to its highest level since the first three months of 2015, but banks expected growth to slow in the third quarter.

The survey of banks and building societies was conducted between May 23 and June 10, a couple of weeks before the June 23 vote to leave the EU.

The Bank of England reported that enthusiasm for credit card lending and other unsecured loans also picked up, while the availability of business loans was expected to stay flat. The Bank of England has taken steps earlier this week to ensure British banks keep lending as the financial consequences of the country’s decision to leave the EU began to materialise, lowering the amount of capital banks must hold in reserve.

The effects of the Brexit vote have reverberated outside the country.

Home prices across Canada are set to jump this year as interest rates are kept near record lows by economic uncertainty from the UK referendum, according to brokerage Royal LePage.

The average house price will rise 12.4% from 2015 to C$563,000 (€389,000), the highest year-over-year forecast from a real estate firm since at least 2000, Royal LePage reported.

Price gains will be led by Toronto and Vancouver, the country’s hottest housing markets.

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