Acquisition of Redrow by Barratt could be 'incredibly promising' or 'a hinderance' for UK housing market

Barratt Developments announced yesterday (7th January) that it has agreed the terms for a £2.5bn merger with Redrow PLC — but the industry has mixed opinions on what the implications for the UK housing market of this acquisition could be.

Once the transaction — which will result in the merged companies being renamed to Barratt Redrow PLC — is completed, Redrow shareholders will have circa 32.8% of the combined group while Barratt shareholders will hold approximately 67.2%.

Property experts agree that this will cement Barratt’s position as one of the largest homebuilders in the UK, but some suggest it poses a sign of recovery in the sector, while some say it will limit housebuilding competition. 

Justin Moy, managing director at EHF Mortgages, commented: "This is an interesting move by two major builders.

“It may be read as a sign of recovery in the housebuilding sector or, equally, an indication of the tough conditions caused by higher mortgage costs and inflation. 

“With the continued lack of supply of housing across the UK, the merger shouldn't affect the wider plans of trying to meet that shortfall, but the mix of property built may need to be skewed towards smaller, more affordable options."

Akhil Mair, director at Our Mortgage Broker, said: "The acquisition of Redrow by Barratt Developments is incredibly promising for the UK housing market.

“This strategic move not only cements Barratt's position as one of the largest homebuilders in the UK but also sets a strong foundation for enhanced quality, service and sustainability in the industry.

“The deal signifies a significant step towards addressing the housing shortage in the UK.

“With both companies combining their expertise and resources, we can anticipate a more efficient delivery of much-needed homes across the country. 

“The commitment to accelerate homebuilding reflects a positive outlook for meeting the growing demand for housing in the UK.

“While some may raise concerns about limited competition, it's important to note that healthy competition can still thrive in the market, even with the consolidation of developers.

“The focus should remain on delivering homes at reasonable prices while maintaining quality standards, and this merger presents an opportunity for that."

Darryl Dhoffer, adviser at The Mortgage Expert, concluded: "The worry with this deal is that reduced competition could give the merged entity more control over pricing, which could potentially lead to higher prices for buyers.

“With fewer major players, there could also be less variety in house designs and features, and less incentive for innovation in the sector.

“Deals like this often involve redundancies to eliminate duplication, impacting employees in both companies, which I can see happening.

“Let's hope this acquistion does not hinder the new build market but instead boosts it."

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