Shares in leading UK house builder Barratt Developments (BDEV) jumped to the top of the FTSE leader board with a gain of more than 5% to 676p after the company posted an encouraging trading update despite the pressures on the construction sector.
Ahead of its annual general meeting, Barratt reported trading since the start of July had been strong even after a ‘significant reduction’ in Help to Buy reservations and the ending of the stamp duty holiday.
SOLID FOUNDATIONS
Net private reservations, a good measure of forward sales in the house building industry, have continued to recover since July reaching an average per week of 281 compared with 288 last year and 262 in the same period of 2019.
Last year’s figure was helped by the ‘unfreezing’ of the housing market after the first lockdown and increased Help to Buy reservations ahead of the tapering of the government programme in December.
The firm said it was ‘particularly pleased’ with the resilience of private reservations given the lack of government support measures this year. So far just over 20% of reservations have used for Help to Buy against more than 50% last year.
Total forward sales at the start of this week were 15,393 homes compared with 15,135 this time last year and 12,963 in 2019, with a market value of £3.94 billion or nearly 8% more than last year and 28% higher than 2019.
POSITIVE OUTLOOK
Despite well-documented problems with the supply of building materials and labour shortages, Barratt said it was working closely with sub-contractors and suppliers and hadn’t seen any significant disruption to its build programme.
Selling prices continue to rise, as confirmed by house price data from building societies and the Land Registry, with the average price in the firm’s wholly-owned order book - that is, excluding joint ventures - up 4% on this time last year and 9% on 2019 at £344,300, even allowing for a lower average price in London due to a different product mix.
Chief executive David Thomas described the firm as in a very good position, with a substantial net cash position and strong forward sales as well as a sizeable land bank for future development.
SUPPORTING ROLE
Also pleasing investors this morning was building materials supplier Brickability (BRCK), whose shares gained 3% to 105p after the firm said it expected revenues for the first half to September to jump 300% compared with last year to roughly £223 million.
Even after adjusting for acquisitions, like for like growth is seen at 54% thanks to the strong post-pandemic recovery and pent-up underlying demand for new homes given the UK’s limited and ageing housing stock.
According to the firm the first three months of this year saw the highest number of new homes built in a quarter in the UK for more than 20 years, helping boost its selling prices.
