Barratt calls recovery as property perks up

Barratt Developments, one of Britain's best-known housebuilders, has reported a surge in demand and reckons the market is at a five-year high.

by Andrew Saunders
Last Updated: 27 Jun 2013
The firm, made famous in the eighties by TV adverts featuring iron-jawed action man Patrick Allen hanging out of a helicopter, says that private forward sales (the housing equivalent of the order book) are up a whopping 28.5% to £1bn so far this year on the back of rising optimism, an easing of mortgage credit and rapid take up of the government’s Help to Buy scheme. The firm reckons the market is at its most buoyant in five years, and expects a significant boost to full year profits as a result.
 
CEO Mark Claire said, ‘Our improved performance is being underpinned by stronger market conditions’. Don’t get carried away there, Mark…

The Help to Buy scheme in particular seems to be having a big impact - private reservations (a measure of activity based on the number of people paying reservation fees for a new home on one of Barratt’s 400 active developments) since the start of the Help to Buy Scheme are up 18% year on year.

All other things being equal, it seems that Brits still want to buy their own homes if they can. A spokesman for the firm told MT that demand is strong across the country but especially in London and the South East. 24 flats out of a total of 130 in a new block on the capital’s Horseferry Road have sold off-plan in the week since it started taking deposits, that’s £35m-worth and counting…

The first stage of the Help to Buy scheme - effectively a state-backed loan for the purchaser’s deposit - applies only to new build and so firms like Barrett will see the maximum benefit. For many prospective first-time buyers the monthly cost of renting is greater than that of paying a mortgage: raising the dosh for a deposit has been the limiting factor.

And while it is nice to read a positive story about the property market for a change, this news won’t do much to calm the fears of those who say that the unprecedented level of state intervention in the property market is helping to inflate another bubble and exacerbate differences between London and the rest of the country.  

So far that effect is limited by the fact that new build represents such a small proportion of total property sales. The next phase of the Government scheme - which will apply to ‘second hand’ homes as well - comes in next year, and it’s bubble-raising powers seem likely to be much greater. Anyone would think there was an election on the way…

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