Where to next for the Barratt’s share price?
With demand for Barratt’s homes decreasing by nearly 1/3rd what is the outlook for the company’s share price until year end?
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.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Act on share opportunities today
Go long or short on thousands of international stocks with spread bets and CFDs.
- Get full exposure for a comparatively small deposit
- Trade on spreads from just 0.1%
- Get greater order book visibility with direct market access
See opportunity on a stock?
Try a risk-free trade in your demo account, and see whether you’re on to something.
- Log in to your demo
- Take your position
- See whether your hunch pays off
See opportunity on a stock?
Don’t miss your chance – upgrade to a live account to take advantage.
- Trade a huge range of popular stocks
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See opportunity on a stock?
Don’t miss your chance. Log in to take advantage while conditions prevail.
Live prices on most popular markets
- Equities
- Indices
- Forex
- Commodities
Prices above are subject to our website terms and agreements. Prices are indicative only. All share prices are delayed by at least 15 minutes.
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
