UK’s largest housebuilder to buy less land, in blow to Labour’s homes target

Barratt Redrow blames effects of Iran war, and likely impact on mortgage rates and costs, for further reduction

Britain’s largest housebuilder is planning to dramatically cut back on buying new land, blaming the impact of the conflict in the Middle East and putting Labour’s ambitious housebuilding target under more pressure.

Barratt Redrow said it intends to approve between 7,000 and 9,000 plots of land for purchase in its current financial year, far lower than previous guidance of between 10,000 and 12,000.

The company, which had already committed to buying less land this year than its previous financial year, said “geopolitical events” had prompted the further reduction.

“Now, with a less certain backdrop, given recent geopolitical events and their likely impact on mortgage rates and build cost, we are being even more selective,” the company said.

As a result, Barratt Redrow now expects to spend between £700m and £900m on land this year, down from previous guidance of between £800m and £900m.

Earlier this month the London-focused housebuilder Berkeley said that it is to stop buying new land, implement a hiring freeze and employ fewer subcontractors in response to the impact of “geopolitical volatility” on the property market.

The move to curtail land buying plans by two of Britain’s biggest housebuilders puts Labour’s manifesto pledge to build 1.5m new homes over five years under even more pressure.

Labour’s first year in power resulted in just under 116,000 starting to be built in England, well short of the required run rate of 300,000 annually to achieve its target, according to the Centre for Policy Studies.

Oli Creasey, the head of property research at Quilter Cheviot, said: “Barratt had already committed to buying less land this year compared to what had been sold in order to optimise the size of its landbank.

“However, that guidance has today been reduced by a further 3,000 plots, meaning that only around half of the land sold this year will be replaced. Following Berkeley Group’s decision to slow land purchases, there is increased concern that the housebuilding sector is digging in for another tough period.”

On Wednesday, Barratt also said that its £100m target for cost cuts after its £2.5bn takeover of its rival Redrow in 2024 has now been confirmed.

The company said it achieved £20m of savings in its last financial year, and expects to achieve £50m this year, with a further £30m by the end of December 2027.

David Thomas, the chief executive of Barratt Redrow, said that he did not expect the conflict in the Middle East to affect the company’s performance this year.

Almost 95% of the company’s sales target for this financial year has already been locked in, and it reiterated its guidance of building 17,200 to 17,800 new homes and achieving £568m in pre-tax profits.

However, the company’s share price has fallen by almost 40% over the past year.

“Barratt Redrow’s valuation has taken a big hit in recent months due to the Middle East conflict,” said Aarin Chiekrie, an equity analyst at Hargreaves Lansdown. “It could be a while before macroeconomic conditions turn more favourable, so potential investors will need plenty of patience.”

The shares rose 2% on Wednesday morning.