Housebuilders hail stability but warn mortgage drought will hurt

<strong>Barratt shows</strong> <strong>signs of stability as volumes pick up but mortgage drought continues</strong><br /><br />Barratt Developments yesterday reported a 19 per cent fall in private house prices over the last 12 months and warned that a sustained improvement in training conditions would remain elusive until the availability of mortgage finance recovers.<br /><br />However, the group has witnessed a pick up in sales in the past six month. Barratt group chief executive Mark Clare said that since the beginning of the year private homes sales had lifted by 22 per cent to 600, meaning the group was able to deliver adequate sales volumes during the second half at planned sales prices.<br /><br />Clare said the market was stabilising rather than recovering.<br /><br />Barratt said that for the 12 months to 30 June selling prices for average home developments dropped 14 per cent to &pound;157,000 compared to &pound;183,000 the year before, while average selling prices dipped by 19 per cent to &pound;166,000 to &pound;208,400.<br /><br />Britain&rsquo;s largest housebuilder by volume said its total completed sales fell 29 per cent to 13,202 in the year to end-June. Private sales were 25 per cent lower at 2,069, while social housing completions accounted for 15.7 per cent of total completions.<br /><br />Halifax, Britain&rsquo;s biggest mortgage lender, said on Wednesday house prices only fell 0.5 per cent in June against an annual decline of 12.5 percent, the slowest since last July.<br /><br />Barratt Developments said cancellation rates for new homes have fallen to just under 20 per cent in the first six months of 2009 down from 37.4 per cent in the equivalent period of 2008.<br /><br />Clare added: &ldquo;Confidence remains fragile and sustained recovery will depend on the wider outlook for the economy particularly the availability of mortgage finance which remains highly constrained.&rdquo;<br /><br /><strong>Redrow wants to return to its former &ldquo;premium&rdquo; values as stability emerges in the sector</strong><br /><br />Redrow yesterday disappointed analysts by warning full year results will be at the lower end of forecasts, but joined larger rival Barratt Developments to suggest volumes and prices have stabilised in the last six months.<br /><br />The groups said for the twelve months ending 30 June 2009 it had completed 2,113 new homes in the period, down form 3,295 the year before.<br />Like other housebuilders in the sector Redrow has been ravaged by the slump in demand for houses as mortgage availability dries up.<br /><br />Redrow chairman Steve Morgan said: &ldquo;The most significant concern to the industry remains the chronic shortage of mortgage supply exacerbated by the widespread practice of down valuations by surveyors representing mortgage lenders.&rdquo;<br /><br />The group said its average selling price was &pound;137,500 &ndash; down 12.4 per cent from the previous year. It said it had made efforts to reduce debt to &pound;215m from &pound;269.1m, well within the group&rsquo;s &pound;424m banking facilities and said it remains focused upon delivery further debt reduction by June 2010.<br /><br />The group reported that sales have been &ldquo;relatively stable&rdquo; in the past six months, with private home sales up 22 per cent.The group said it has now resumed building &ldquo;at a controlled rate&rdquo; across developments to meet an anticipated seasonal upturn in demand in September.<br /><br />The group said that at the end of March this year it began a restructuring process to return the business to its former traditional family housing focus. Morgan said: &ldquo;If we were talking of the group in supermarket turns Redrow used to be Waitrose, but its now slipped to the position of a discounter.<br /><br />We want to go back up to premium level.&rdquo;<br /><strong>TALE OF TWO HOUSEBUILDERS</strong><br />ANALYST VIEWS: ARE THINGS LOOKING UP FOR THE HOUSEBUILDER AND PROPERTY SECTOR?<br /><strong><br />MANOJ LADWA </strong>ETX CAPITAL<br />Barratt shares have more than doubled since the beginning of 2009 so questions will be asked as to whether this trading statement will halt the upward trend. In exceptionally bad market conditions Barratt looks in a reasonable state in terms of margins, completions and the size of the land bank but the debt levels are substantial and not reducing as fast as the market would like. The current level is &pound;1.28bn.<br /><strong><br />CHARLIE MENEGATOS </strong> ACCENDO MARKETS<br />The Barratt statement follows a positive update from rival Persimmon on Tuesday, with both companies confirming that no further writedowns in land holdings required, and the return of some stability in the market. The statements from both companies indicate a sea change in the property and housebuilding sector, added to which the recent successful AIM flotation of Max Property also shows investors seeing value in the sector.<br /><strong><br />IMRAN AKRAM </strong> COLLINS STEWART<br />Overall, Barratt reported trading in line with expectations, Redrow was disappointing. Both groups are seeing more stability in the housing market with lower cancellation rates. Both Redrow and Barratt need equity in our view as current debt levels remain high. With the market stabilising both groups will ideally need to start buying land again in 2010. We remain sellers of both stocks until/unless the financing picture becomes clearer.