Barratt Developments, the largest housebuilder in the UK, has reported a drastic decline in profits for the past year, attributing the drop to a decrease in home sales and falling prices amidst a struggling property market.

For the financial year ending June, Barratt recorded a pre-tax profit of £170.5 million, which is a staggering 76 percent decrease from £705.1 million reported in the previous year.

The firm constructed 14,004 homes, representing nearly a 20 percent reduction in output, marking the lowest production level since 2013. It is estimated that house prices have decreased by approximately 3 percent since last summer, leading to an average selling price of £344,000.

Additionally, Barratt’s profitability faced pressure from rising costs associated with remediating unsafe cladding on some of its older properties. The company increased its fire safety provision by £125.9 million, bringing its total to £628.1 million earmarked for addressing cladding and safety issues across 262 sites.

In response to the significant profit drop, Barratt has reduced its dividend payouts by 50 percent this year. Shareholders will receive 11.8p per share on November 1, a decrease from last year’s 23.5p per share. Following the announcement, Barratt shares fell by 23p, or 4.6 percent, closing at 496p.

Barratt’s management acknowledged the hardships faced during the year, noting that potential buyers were deterred by increased mortgage rates, the ongoing cost of living crisis, and unfounded concerns regarding a possible drop in house prices.

David Thomas, the chief executive of Barratt, mentioned that while buyers are still cautious about mortgage rates, there are signs of improving confidence in the market after a prolonged period of uncertainty. He stated, “There are still big challenges in terms of affordability [but] customer sentiment is improving. If you talk to anyone in the residential market — new build or second-hand — they would say the overall backdrop is improving.”

This summer has shown a positive trend for Barratt, with sales reaching 0.58 homes sold per week at each site over July and August, indicating nearly a 40 percent increase compared to the previous summer when mortgage rates surged.

Founded in 1953 by Sir Lawrie Barratt, who started the company due to his inability to buy a home, Barratt Developments has since become a prominent name in the housing sector, joining the London Stock Exchange in 1968 and securing a slot in the FTSE 100 index.

Although Thomas remains optimistic about a market recovery after two years of decline, he acknowledges that Barratt may not fully benefit from any upswing in the next fiscal year. For the current financial year, which concludes in June 2025, the company anticipates completing at most 13,500 homes.

The expected dip in completions has been attributed to the company’s land acquisition strategy over the last two years, leading to a reduced number of ongoing development projects. Presently, Barratt is active on 326 sites, with expectations of a 9 percent decrease in this number within the next year.

Recently, Barratt has restarted land purchases; however, Thomas expressed that he has no regrets about the previous period of inactivity due to the estimated 15 percent downturn in land prices. He commented, “I’d rather report that outlet numbers are down by 9 percent than saying I bought a whole lot of land when land prices have fallen by 10 to 15 percent. You can’t always win.”

Looking ahead, Barratt is optimistic about restoring outlet numbers to last year’s figures by the end of next year, partly thanks to Labour’s initiatives to streamline the planning system and facilitate new housing developments. Thomas remarked on the government’s swift actions prior to their recess, praising their commitment to increasing housing supply, stating, “That clarity is very welcome.”