UK: Barratt profits add to optimism in housebuilding sector

Barratt Developments today reported underlying pre-tax profits up 73% at £192m

Barratt Developments today reported underlying pre-tax profits up 73% at £192m - Credit: PA

Housebuilder Barratt Developments added to surging optimism around the housing market today as it reported booming profits and sales.

Britain’s biggest housebuilder by volume hailed the impact of Government measures to stimulate the market, which have helped drive its forward sales almost 54% higher to £829.7million.

Barratt sold 13,663 homes during the year to the end of June, up 6% on a year earlier, while underlying pre-tax profits beat City expectations by soaring 73% to £192m.

The Leicestershire-based builder echoed strong trading by peers including Bovis, Persimmon and Taylor Wimpey, which have all reported swollen order books and rising margins in recent days.

It said improved mortgage availability and the Government’s Help to Buy scheme - which allows people to buy a home with a 5% deposit - are tempting buyers back to the market.

Since the launch of Help to Buy in April, private reservations have surged almost 35%, said Barratt, with market conditions improving across all its regions.

Home loans have also become cheaper and more widely available with the help of the state’s Funding for Lending Scheme, which incentivises banks and building societies to boost lending.

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An 8% increase in average selling prices to £195,000 helped lift its operating margin to 9.7% from 8.2% a year earlier. Revenues rose 12% to £2.6 billion. On average, analysts had expected the group to report profits of about £182 million.

Barratt plans to hike its output to about 16,000 completed sales per year - but did not say when this will be achieved. However, it expects to keep its network of sites stable at about 381.

The builder also announced a 50/50 joint venture with Morgan Stanley Real Estate Investing to build 770 homes worth about £275 million in Greenwich, London, close to the O2 arena.

Chief executive Mark Clare said: “As more house buyers return to the market, supported by improved mortgage availability and the Help to Buy scheme, we are in a strong position to continue to grow the value of the business.”

Figures this week showed optimism among surveyors about rising house sales is at its highest levels in at least 14 years.

The Royal Institution of Chartered Surveyors (Rics) said its findings for June point to the “beginning of a recovery,” with the month also being the strongest for house price increases in more than three years as demand from would-be buyers strengthens.

A balance of 45% more surveyors expect sales to increase rather than fall over the coming three months, marking a new high for the survey, which has been running since April 1999.