Barratt Developments, Britain's second-biggest housebuilder, yesterday added its name to the growing list of property experts predicting a housing market slowdown over the coming months.
Barratt said its sales had fallen by up to 10 per cent during the week after the emergence of the Northern Rock crisis and warned that it expected higher interest rates to have a sustained effect on the market.
"We have already signalled that it would be prudent to assume that the cumulative impact of interest rate increases would result in the housing market tightening in 2007-8," said Mark Clare, Barratt's chief executive.
"The recent credit squeeze has further affected customer sentiment and pressure on lending institutions has led to a tightening of lending criteria and mortgage availability."
Mr Clare said that while housing market fundamentals remained strong, particularly in London and the South-east, the combination of five interest rate rises over the past year and the summer's credit crisis would have a significant impact during the autumn and winter months.
"It is not yet clear how quickly the market will recover, but we have to assume that there will be downwards pressure on volumes and price inflation in the short term," he said.
Barratt warned that consumer sentiment had been seriously damaged by the Northern Rock crisis. Sales in the first weeks of September would normally be significantly higher for a major housebuilder, but the company said it believed homebuyers had been scared off by concerns that the Bank of England's bail-out of Northern Rock could trigger a housing market collapse. Barratt's warning follows similar alerts from estate agents and economists on the slowing housing market. This month, the Royal Institute of Chartered Surveyors warned there was now a one-in-10 chance of a full-scale housing market crash over the next 12 months.
However, Barratt said it was cautiously optimistic about the longer-term outlook.
"Clearly there is a signal from the Bank of England that interest rates may fall and that may reactivate the market a little bit," Mr Clare added.
Barratt also pointed out that the Government has committed to making more land available for housing developments, which would boost housebuilders' fortunes. The housebuilder announced yesterday that its pre-tax profits for the year to the end of June rose by 9.3 per cent to £427.8m.Reuse content