Barratt forecasts £107m profit on back of housing market boom | Barratt Developments

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Barratt Developments, Britain’s biggest housebuilder, has forecast it will make more than £100m in annual pre-tax profits, as it benefits from the housing market boom and buyers’ rush to complete purchases before the end of the stamp duty holiday.

The company said strong demand for new houses around the country would enable its full-year pre-tax profits, after adjusted items, to reach about £107m in the year to the end of June, slightly above analysts’ expectations.

It also highlighted “a modest increase in the proportion of larger family homes” in its forward sales order book – a further sign that homebuyers are adjusting their priorities in the wake of the coronavirus pandemic.

The housebuilder said its completion levels had bounced back from the pause in construction during the first wave of the pandemic, with it finishing the building of 17,243 homes in the 12 months to 30 June, more than previously forecast. Significantly more homes were completed than a year earlier, but the figure was slightly lower than two years previously.

Barratt said its net private reservation rate was strong and was 30% higher than a year earlier, although this was partly because of the comparison with a period when its sales outlets were closed during the first lockdown.

The company, which increased its forecast of how many homes it expected to sell this year in January, said it was well positioned for the next 12 months, with 14,334 forward sales, higher than the number in the previous two years, with a value of £3.5bn.

Barratt warned, however, that it had seen construction cost inflation of about 2% during the past year, which has increased to between 3% and 4% currently, related to the continued strength of the housing market and constraints in parts of its supply chain.

David Thomas, Barratt’s chief executive, said: “While these are still uncertain times, we enter the new financial year in a strong position and remain focused on our medium-term targets, including delivering 20,000 homes a year.”

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Barratt’s results came as the latest Land Registry figures showed average UK house prices continued to soar, rising 10% over the year to May, up from 9.6% a month earlier.

However, housing market watchers are predicting that house price growth will slow during the second half of the year as the stamp duty tax break is phased out and the supply of new homes increases as the UK comes out of the pandemic.

Barratt and other housebuilders have profited from the stamp duty holiday, pent-up demand for property during the pandemic and the shift to working from home.

Danni Hewson, a financial analyst at the stockbroker AJ Bell, said: “After a party time for the sector, there is increasing concern over a possible hangover to come. For the time being, rising house prices are keeping pace with increases in raw material and other build costs. However, the obvious corollary of this is how a downturn or even a relative cooling in the property market will leave Barratt exposed.”

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