Barratt New Homes Sales Surge Even as Prices Soar

IN ITS LATEST trading update for this year to the 1 May, Barratt Developments PLC declares the company is building an average of 362 houses a week and is fully for sold for this financial year, which ends for Barratt on 30 June 2022.

Total forward sales this year, to 1 May 2022 were 15,821 homes – 6.6% ahead of 2021. They were valued at £4,383.3m, up by 18.6% compared to last year’s £3,696.3m.

Despite soaring inflation and expected interest rate rises, home reservations have also increased by 12% on the same period last year.

That said, the company has allowed for total build cost inflation of around 6% for FY22, calculated on infrastructure, materials and labour costs. Barratt says it expects the build cost inflation to remain at elevated levels over the coming months as suppliers move to more dynamic pricing, primarily as a result of energy cost volatility. The company says it “will continue to work collaboratively with our supply chain partners to secure sustainable, competitive pricing”.

Expecting to improve or maintain its profit margin, Barratt has raised the price of its homes by approximately 7% for forward sales in the second half of the year. Build cost inflation is also set against Barratt’s “improved fixed cost efficiency”, it says.

This year, Barratts has 326 outlets adding 31 new sites the past five months and the company says it expects to enter the second half of 2022 with more outlets than last year.

In the financial year to date there were 12,692 home completions, slightly down on 2021’s figure of 13,558. As Barratt previously flagged, the decrease in completions in the financial year to date reflects a return to the firm’s normal seasonality, it says, as well as the impact of the tapering of the Help to Buy scheme and the original stamp duty holiday deadline, which fell within the comparative period in 2021.

Barratt has agreed the purchase of 5,076 plots on 29 sites, bringing the total for the financial year to date to 13,945 plots across 77 sites, compared to 2021’s 12,034 plots across 66 sites. It expects to buy up to 20,000 plots in the coming financial year with a land bank of around 4.5 years.

David Thomas, Chief Executive commented: “We are seeing strong demand across the country for our high quality, energy efficient homes and our excellent operational teams are working hard to meet this demand. We expect to deliver full year trading results in line with the Board’s expectations as we remain focused on growing towards our medium-term target of 20,000 homes a year.”

As at 29 April 2022 the Group had c. £735m of net cash and expects year on year growth of between 4% and 6%.

Building Safety Pledge

Along with many UK developers, Barratt pledged in April to fund the replacement of dangerous cladding and other fire safety measures on the buildings it constructed, alongside paying the Residential Property Developer Tax.

The company says it is now working with the Department for Levelling Up, Housing and Communities to agree a fair approach to remediation including an independent arbitration process.

Barratt is urging Government to reconsider its plans to expand the scope of the Building Safety Levy which it terms “unjust and disproportionate, further punishing UK housebuilders who were not responsible for most of the historical buildings or building safety issues.”

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