Housebuilder Barratt says access to mortgages is vital to recovery
Feb 25 2010 by Karen Dent, The Journal
BARRATT has narrowed its losses and grown its order book but said greater mortgage availability remained vital to support the housing market's recovery.
Britain’s biggest housebuilder by volume admitted its fortunes remained tied to the general economic outlook and people’s access to mortgages, especially in the higher loan-to-value bracket.
Chief executive Mark Clare said: “Of course recovery does rely on the all important mortgage finance. The biggest issue today is the way new-build and second-hand homes are dealt with by lenders.”
He welcomed plans by Britain’s second biggest mortgage lender, Santander – which owns Alliance & Leicester and Abbey – to raise its maximum loan-to-value on new-build mortgages from 80% to 90%.
Someone looking to buy a £150,000 property would need a 20% deposit of £30,000, but Santander’s decision has halved that. Barratt hopes other lenders will follow suit, giving a boost to the first-time buyer market.
Corporate affairs director, Patrick Law, said: “They do tend to hunt together and where one goes the others follow.”
The group announced yesterday that interim pre-tax losses before exceptional items fell to £48.5m from £80.6m in the six months to the end of December. Operating profits before exceptionals rose to £21m from £16m.
And the group’s selling prices jumped by 3.5%, with the average new Barratt home fetching £166,300. But completions were down from 6,905 to 5,053 and group revenue dropped from £1,261.8m to £872.4m.
However, forward sales were well ahead, standing at £651.2m at the end of December, compared to £455.8m in 2008.
And by February 21, they had increased to £847.4m meaning Barratt has now secured around 77% of its full-year target.
Mr Clare said: “During the last six months, we have improved our trading performance, successfully refinanced the business and invested in new land. The value of our forward order book is now up 27% year-on-year and with our ongoing focus on optimising selling prices we are expecting to see significant improvements in operating margin in the second half.”
Barratt more than halved its debt to £605.3m, after raising £720.5m in a share placing and selling off some commercial property. The £129.9m exceptional items related to amended financing arrangements following the share placing and rights issue.
It now aims to increase spending on land in the second half after returning to the market in mid-2009. Since then, it has agreed to buy 74 new sites at a cost of £358m, where it plans to build 9,038 homes.
They include a £92m project covering seven sites in the North East, including Greenside, on Newcastle’s Great Park, and The Leazes, Throckley.
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: “A combination of self help and significant Bank of England stimulus appear to be bringing the ‘good times’ back into view for Barratt.
“On the downside, mortgage availability remains restricted, while considerable uncertainty over the outlook for public sector jobs and tax rates continues to temper confidence.”
The British Bankers’ Association said this week that mortgage lending in January was at its lowest since May 2001, following the end of the Government’s stamp duty holiday. The major banks advanced £8.02bn last month, a 26% drop on December.
Meanwhile, statistics from the Department of Communities and Local Government showed North East property prices grew by 4% last year, second only to London’s 4.9% increase.
And house prices rose by 0.8% in December, pushing the annual rate of increase to 2.9%.
