Where to next for the Barratt’s share price?

​​​Have more affordable UK house prices led to more demand?

​Houses are theoretically more affordable now than they were last year, says Halifax, the largest mortgage lender in the UK. This is because the prices of houses have decreased while salaries have increased.

​However, high mortgage rates still make it difficult for many potential homeowners to buy property. According to Halifax, the average home in the UK is now 6.7 times the yearly earnings of a full-time worker, down from 7.3 times last year.

​One of the main concerns for home construction companies is whether this will lead to an increase in people looking to buy homes. 

​Barratt Developments has experienced the effects of consecutive interest rate increases firsthand, with a 13% decrease in completed homes in the latter half of the year. The company also reported a slower than average rate of reservations for new homes from mid-May to the end of June.

​The demand for new homes has decreased by nearly one third over the past year, resulting in a drop in Barratt Development's share price. The company reported a 32% decrease in reservations for new homes in the year leading up to the end of June and attributed this to the increased mortgage rates and a decrease in demand. Additionally, over half of this decline was due to a 49% decrease in demand from first-time buyers who are dealing with higher borrowing costs and the end of the government's Help to Buy scheme.

​Barratt Developments has also had to deal with increased expenses. However, the company expects that the inflation tied to building costs will decrease by half in the next fiscal year, from about 10% in the year leading up to the end of June to 5%, mainly because of a decrease in energy and raw material costs.

​Where to next for the Barratt Development share price?

​Barratt’s share price has risen by around 50% from last October’s low to this year’s May high at 515.00 pence before dropping by around 20% to its July low, close to the 61.8% Fibonacci retracement of the entire advance.

​Since then the Barratt share price has recovered somewhat but is struggling to break through its 2022-to-2023 downtrend line. Barratt’s share price has been rejected by it at 458.7p last week and would need to not only overcome this high but also the July peak at 469.9p to confirm a medium-term bottoming formation.

​In this case a rise back towards the May peak at 515.0p could be on the cards for the remainder of the year, a 14% rise from current levels (as of 04/09/2023).

​Support can be seen along the 200-day simple moving average (SMA) at 447.1p ahead of the 55-day SMA at 436.5p and the July-to-September tentative trendline, currently at 429.0p.

​Provided that the Barratt’s share price remains above its 420.8p August low on a daily chart closing basis, a technically bullish reversal may unfold over the coming weeks.

​Were this low to be fallen through, however, the July trough at 395.3p would be back in the frame.