Wednesday 14 October 2020 9:32 am

Barratt reports strong forward sales as housing market recovers

Barratt Developments (BDEV) has reported an increase in forward sales as the housing market bounced back from the first wave of coronavirus restrictions. 

The housebuilder said total forward sales as of 11 October increased 16.7 per cent to 15,135 homes at a value of £3.7bn. 

Read more: Barratt shares rise on strong forward sales despite Covid-19 hit

It also reported a 20.8 per cent increase in its sales rate of 0.87 net private reservations per active outlet per average week. 

The UK’s housing market has enjoyed a surge in demand as a result of pent-up demand and a stamp duty holiday introduced by the government over the summer. House prices in the third quarter enjoyed their strongest quarterly increase since before the financial crisis. 

However wider economic issues, particularly the rise in unemployment, suggest activity is unlikely to be sustained. 

The firm scrapped its special dividend in September after it reported a 45 per cent drop in pre-tax profit as it took a hit from lockdown. 

As construction sites started to reopen, Barratt has completed 4,032 homes since 1 July, up 24 per cent on the previous year. 

Despite economic uncertainty and growing fears of an imminent national lockdown, Barratt forecasts completions to grow to between 14,500 and 15,000 homes in the full year. 

Chief executive David Thomas said: “As we look ahead, whilst significant economic and political uncertainties persist, we believe our disciplined approach and strong balance sheet provide us with the resilience and flexibility to react positively to future challenges.”

The housebuilder’s financial position leaves it with a good buffer should there be further restrictions introduced before the year-end. As well as its net cash position of £570m, the undrawn credit facility in the background of £700m provides Barratt with further support if necessary. 

Read more: UK house prices stage rapid recovery in third quarter

However Richard Hunter, head of markets at Interactive Investors notes that the dilution of Help to Buy next year could expose the firm’s reliance on the programme. 

Barratt has seen 51 per cent of its new reservations using the scheme, of which 74 per cent were first time buyers, up from 71 per cent the previous year. 

“The availability of high loan to value mortgages has suffdered post-pandemic, while the general outlook for the UK economy is currently bleak, with stuttering Brexit negotiations compounding the effects already being suffered as a result of Covid-19”, Hunter added.

Shares in Barratt rose 0.5 per cent. 

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