Barratt in housing market boost

HOUSEBUILDER Barratt Developments today fuelled hopes of recovery in the sector with rising volumes and prices bringing about an improvement in operating margins.

The FTSE 250 group completed 5028 homes in the six months to 31 December and says it on track to hit its full-year targets of 12,000 completions.

The average price of its properties rose 4 per cent to £167,000 as it switched its focus to houses rather than flats in response to market conditions.

A lack of mortgage availability has proved a barrier to first time buyers and has also led to lower demand from buy-to-let investors.

Houses consequently made up around two third of its sales – up from around half during the same period the previous year.

Barratt, one of the UK’s big three housebuilders, said the operating margin for the first half is likely to be around 2 per cent, up from 1.3 per cent the previous years. It added that its forward sales climbed 43 per cent to £651m.

Mark Clare, group chief executive, said that the group remains cautious in its outlook despite anticipating that total average selling prices will increase by around eight to 10 per cent in the full financial year.

"With margins growing and a 43 per cent increase in total forward sales, the market has improved but is still subject to the major uncertainties of both mortgage finance and the general economic outlook," he said.

However, he believes that Barratt is well placed to emerge from the downturn.

Its net debt levels have shrunk significantly after its £720m rights issue and share placing last year, from £1.28bn to £610m. This is expected to fall further in the coming months.

Since re-entering the land market in mid 2009, it has agreed terms on £315m of land purchases, equating to 7,730 plots.

The group's owned land bank totalled 51,600 plots as at the end of December 2009.

Analysts at Panmure Gordon said: "Barratt's pre-close trading statement is in line with expectations from a trading point of view, but better than expectations from a cash point of view."