Barratt building boosted by Help to Buy

Help to Buy is buoying Barratt, but is it all hot air?

by Rachel Savage
Last Updated: 16 Jan 2014

Home builder Barratt Developments has had a stellar six months, as Help to Buy boosted demand for its homes.
The company finished 6,195 new homes in the last half of 2013, up 19% on the previous year. 29% of those were bought using the government’s Help to Buy scheme, a policy which has prompted worries (and Tory poo-pooing) about a repeat of the housing bubble.
Barratt’s average selling price climbed 14% year-on-year to £211,000 and forward sales were up 71% to £1.3bn.
‘As a result of the continued recovery of the housing market across all regions and our £3.1 billion investment in new land over the last four years, we have been able to increase materially the number of new homes being built and our profitability,’ Barratt chief exec Mark Clare said.
Whichever way you look at it, the housing market is on the up. House prices rose 8.4% in 2013, and are rising in all regions of the UK (not just foreign-fuelled London), according to building society Nationwide. Bank of England data showed that mortgage approvals were at their highest level since January 2008 in November.
Unsurprisingly, house builders’ share prices have risen too. Redrow is up a huge 93% in the last year, while Barratt and Persimmon climbed 69% and 56% respectively. Given that so much of their new business is coming from Help to Buy, the obvious question is whether builders’ frothy sales (and share prices) have further to rise.
House building may still have a long way to go to catch up with its pre-recession peak though. Just 135,000 homes were built in the year to April 2013, down from more than 200,000 homes a year that were built before the financial crisis, according to government data.
But with the Bank of England Funding for Lending Scheme pivoting back to businesses and away from the mortgage market in December, we could yet see the brakes applied on house building. Meanwhile, Barratt, and the wider housing market, is at the very least looking buoyant, if not bubbly.

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