industrials

Housing demand still running high, says developer Barratt

Demand for new-build homes in the UK is still running high despite the government winding down a pair of its schemes to help buyers, according to Barratt Developments.

The housebuilder said it was selling homes quicker than a year ago, as it unveiled its earnings for the six months to December 31 2021.

That was unexpected given that demand was already running high 12 months ago, buoyed by the government’s stamp duty holiday and the Help to Buy equity loan scheme as well as the rush of buyers who moved after the lifting of lockdowns in May 2020, the housebuilder added.

The stamp duty holiday, which saved buyers up to £15,000, ended in September and Help to Buy is being phased out. The FTSE 100 developer planned to build “marginally” more homes this year than expected as a result of high demand.

David Thomas, Barratt’s chief executive, said the affordability of housing was one factor pulling buyers into the market — despite the price of the company’s homes increasing 5 per cent to £327,400 in the six months to the end of 2021.

Interest rates have risen in recent weeks, but the cost of borrowing remains low by historical standards.

The increasing price of materials, stoked by rising inflation and supply chain issues, might further push up new build housing costs. “We’re seeing higher levels of build cost inflation . . . but our primary focus is not about price of materials, it about availability of materials,” said Thomas, who added the company would build more than 18,000 homes this year.

In the six months to December 31, Barratt recorded £432.6mn in pre-tax profits, up 0.6 per cent on a year earlier despite revenues falling 9.9 per cent to £2.247bn.

Revenues in the previous year had been particularly high as a result of the company pushing through home purchases that had been stalled during lockdowns, it said.

Barratt has set aside more than £200mn to cover the costs of fixing buildings that are clad in potentially unsafe materials, an issue that came to light after the fatal fire at Grenfell Tower in 2017.

But with the new UK housing secretary Michael Gove putting the onus on developers to unpick cladding issues, Barratt said further provisions could not be ruled out.

“Provisions around cladding are a cloud that hangs over the sector,” said Aynsley Lammin, an analyst at Investec. Concerns about what Gove might impose on the sector are one reason that Barratt’s share price is down 16 per cent to 637p this year, even after a small bounce on Wednesday’s announcement.

That drop reflected fears that housebuilders could face a tax of as much as 12 per cent to cover an estimated £4bn repair bill as well as worries about the wider economy and rising inflation, said Lammin.

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