The largest housebuilder in the UK has warned that the market is likely to “continue to be difficult” for the housing sector during the next few months as prospective buyers battle the rising costs of mortgages.

Barratt Developments said, “Short-term demand has been impacted by mortgage affordability challenges” and that it has seen construction decrease sharply as a result. However, the company also reported PS705m in profits for the year.

The construction industry across the UK decreased sharply in August, as per separate figures from the index of construction purchasing managers released the previous day on Wednesday by S&P Global. The index’s activity decreased to its lowest point since the initial lockdown of pandemics in May 2020.

It is believed that the UK housing market started to decline in September 2022. Liz Truss as prime minister and Kwasi Kwarteng as chancellor created chaos in financial markets by releasing a devastating mini-budget. Barratt stated that it responded by imposing a “headcount freeze” that has reduced the number of employees by approximately 400 jobs and lowered the number to 6,600.

A boom for the prefab maker of classrooms as England Schools’ Raac crises deepens. Read more.

Since this time, prices have been damaged by the rising inflation that has hurt the ability of households to spend and has prompted the Bank of England to increase interest rates 14 consecutively to stop the price of goods and services from rising even more. Banks have boosted mortgage rates to meet the demand and have made new homes more in the hands of fewer individuals.

“Customers continue to face cost of living and mortgage affordability challenges, and new developments are increasingly constrained by an ineffective planning system,” said David Thomas, Barratt’s chief executive.

But despite the current slowdown in the market, Barratt stated that there is an ongoing and growing imbalance between the supply of housing and demand.

Numerous economists, as well as certain ministers, believe that the UK housing sector is not producing enough houses to meet the demand for longer periods, which has kept the prices of homes at record levels despite slowing economic growth. Average home prices dropped by 5.3 percent during the year up to August, which was around PS259,000, according to the Nationwide Building Society.

Construction of more houses in the face of less demand in the current cost of living crisis will aid in lowering prices; however, housebuilders are taking action to safeguard their profits by limiting the building process.

Barratt constructed 17,206 homes during the year that ended on June 30, which was a decrease of 3.9 percent when compared to the previous year. It is planning to reduce the number of homes it constructs in its current fiscal year, which will be between 13,250 and 14,250, which is a reduction of up to 5 percent.

The company claimed it cut its costs from the moment the housing market began to decline in September last year. The reductions helped the company boost its margins on profit by a percentage percent to 18.3 percent. Barratt’s profit before taxes grew by 10 percent to PS705m. But, according to the company’s modified measure that eliminates the one-off adjustments, profits dropped.

Barratt added that overall inflation in the price of houses was below the inflation rate in the building cost, which was impacting its financial viability.