Barratt Developments reports weak house sales
Nov 18 2010 by Iain Laing, The Journal
HOUSEBUILDER Barratt Developments has reported a weaker-than-expected autumn selling season after customers took longer to commit to house purchases.
The Newcastle company said reservations per active site fell to 0.45 a week in the period since July, compared with 0.55 in 2009, as confidence dwindled in the run-up to the Government’s spending review. Cancellations also increased for the period – up to 15.2% from 13.9% – but Barratt said it was encouraged by a 9% rise in its average selling price to £180,000 as it benefits from a change in the mix of its properties.
Chief executive Mark Clare said conditions in the housing market remained challenging, with constrained levels of mortgage lending and weaker consumer confidence seen as the key obstacles to a significant recovery.
He added: “While the autumn selling season has been weaker than anticipated, our encouraging performance on price is expected to drive margin growth for the year.
“There was a lot of media speculation about what was going to be in the spending review, and potential buyers decided they didn’t want to make a large financial commitment until there was more certainty.”
Numis Securities described the first quarter trading update as slightly disappointing from a volume perspective, prompting it to downgrade estimates for next year. It is now looking for profits of £35m, compared with previous forecasts for a figure of around £38m.
Barratt, which is the UK’s largest housebuilder by volume, said forward sales were in line with last year at £870.9m.
It has agreed terms on £220m of land purchases, equating to a total of 42 sites and 4,467 plots. In the period of the trading update, Barratt said it operated from an average of 349 active sites.
The company expects the rate of land acquisition to slow due to its recent success in purchasing land and given greater competition in the market.
Industry data has showed the number of deposits on new homes during the first four weeks of the autumn was 14% down on the same period in 2008, when the market was struggling, and only half 2007 levels.
Taylor Wimpey said earlier this week that it wanted to get back into the land market but other house builders are reluctant to buy land as they fear the values will fall further.
