Barratt share price jumps as housebuilder posts "excellent" first half

Emma Haslett
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Homebuilders Barratt Homes Record Year On Year Profits Of 159%
The housebuilder has reaped the rewards of soaring house prices (Source: Getty)

Another day, another housebuilder smugly proving the property sector is where it's at these days. But one analyst was still cautious...

The figures

The company said it completed 7,626 homes in the six months to the end of December, 9.4 per cent more than last year. The company was receiving 0.66 net private reservations per active site each week - up from 0.58 during the same period last year.

And average selling price leaped 10.8 per cent, breezing past the £250,000 barrier to £254,000, while for privately-owned homes it hit £281,000 - edging closer to £300,000.

Total forward sales rose 20 per cent to £2bn during the period, from £1.7bn in 2014.

Hardly surprising, then, that shares were up 1.23 per cent to 617p in early trading.

Why it's interesting

Right now, housebuilders can't fail, thanks to frenzied demand from customers desperate to buy a home before interest rates rise and mortgage borrowing costs go up (now slated for November, just FYI).

The government is also gunning for them, with various schemes aimed at easing supply pressures in the market - not least the Help to Buy Isa, launched in December, which gives first-time buyers a government "bonus" to help them buy their first home.

And house prices continue to rise. The latest figures from Halifax, published last week, showed prices jumped 9.5 per cent last year.

But Barratt wasn't without it challenges in the final six months of 2015 - particularly in early November. After broker Liberum downgraded three of the four big housebuilders, Barratt included, to "sell", shares fell.

Later in the month they fell again, despite results suggesting forward sales had jumped 20 per cent.

This morning Liberum reiterated its sell rating, saying its caution remains.

"We believe that valuation is stretched and we expect returns to peak in 2016 as selling price inflation moderates and build cost inflation remains high," it said.

What Barratt said

David Thomas, its chief executive, said:

Overall, market conditions are good and we remain confident in our outlook for the full year as we continue to execute our strategies: aimed at ensuring disciplined growth, improving key financial metrics through a focus on efficiency and the continued delivery of attractive cash returns.

In short

Healthy caution from analysts - but with demand for homes soaring, housebuilders are reaping the rewards.

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