Housebuilder Barratt Developments just beat its record for the highest number of forward sales. UK house price growth may have slid from the dizzying heights of last May, but Barratt is reaping the benefits of consistent market growth.
Throughout the 19 weeks to 10 May, Barratt said: “market conditions have remained strong throughout the period with high levels of demand for new build homes across the country".
There were increases for completions, which are expected to hit 16,100 for the full year, up from 14,838 for the 2014 financial year. The increase means Barratt now expects to beat its full-year guidance figure for new builds.
Forward sales, a good measure of demand in the new home market, rose 17.9 per cent to £2.6bn. They were £2.2bn for the same period last year.
The company has launched 64 new developments, and expects to continue to secure “further controlled growth” in the next financial year.
Why it’s interesting
The bump in completions comes at a time when the government is starting to turn the screws on housebuilders as it seeks to meet a target of 200,000 completions a year. In 2013-2014, 140,930 houses were completed, with 111,750 coming from private enterprise. The last time the government’s target would have been met was in 2007-2008, when 218,530 homes were completed.
On the house price front, the market has cooled somewhat from its peak, but conditions are still favourable for companies like Barratt. The economy is viewed as improving, and, despite falling off its July 2014 perch (quarterly annual growth was 10.2 per cent that month, according to Halifax), the market is still growing nicely.
In April, growth was 8.5 per cent by the same measure used above, and has been above eight per cent since December. The seasonally adjusted figure for April is exactly the same as for last April, and, while March was down 0.6 percentage points on the year before, January and February 2015 outperformed the corresponding months last year. The figures are good news for Barratt; steady and consistent growth provides a strong base and should allow it to plan efficiently going forward.
This will be the last financial year as chief executive for Mark Clare. The Barratt supremo is set to make way for current finance director David Thomas on 1 July.
What Barratt said
Mark Clare, group chief executive said:
Our investment in circa £4.5bn of approved land for new housing since 2009 continues to deliver results. Completions for the financial year 2015 are expected to increase by around nine per cent and our forward order book, at more than £2.5bn, is the highest level ever achieved by the group. We remain committed to helping increase the number of new homes across the UK, with our completions increasing by more than 40 per cent over the past four years.
We are on track to deliver a further significant step up in our financial performance in 2015, making good progress towards achieving our 2017 targets of a gross margin of at least 20 per cent and return on capital employed of at least 25 per cent.
The strong forward sales are a sign of optimistic times ahead - although with Britain in the middle of an oft-cited housing crisis, expect housebuilders to come under pressure from the new government.