Barratt calls on lenders to put a floor under market

Housebuilder Barratt Developments reported a rise in selling prices yesterday but warned the shortage of mortgages was holding the market back.

Property loans have become harder to obtain since the recession as lenders have demanded higher deposits, ruling many potential first-time buyers out of the market.

Barratt, one of the industry’s biggest players, said that unless there was a “significant” rise in the availability of mortgages the sector’s growth prospects would remain constrained.

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The firm’s average selling price has increased 7 per cent to £207,000 since the end of June as its mix of properties alters to include more family homes in the affluent south-east of England.

Barratt, which also trades as David Wilson and Ward Homes, said underlying property prices remained “stable”, with London and the south-east proving the most resilient.

In a further sign of a revival in activity, average weekly reservations increased 26 per cent amid an increased number of reservations per site.

The group, which returned to profit earlier this year after house prices slumped in the recession, said it expected a significant improvement in full-year profits as it benefits from selling homes at new sites on higher-argin land.

Chief executive Mark Clare said: “We think it’s been a pretty good start to the year. There have been good sales rates across all the regions.

“The first 20 weeks have shown consumers are actually buying and we have been surprised at the strength of demand given the economic news.”

The London market was being buoyed by strong demand from buy-to-let investors, he added.

But Clare called on lenders to reduce the level of deposits they demand to 10 per cent of a property’s value, compared to the 20 per cent that is currently common.

The number of sites the firm has been developing over the past year increased to 379 from 349 a year ago as it ramps up activity. Land acquired more recently is now being brought into production, with work expected to start on 40 sites by the end of the year.

Mike Bessell, an analyst at Evolution Securities, said it had been a strong autumn for the housebuilder.

He added: “Barratt has clearly mapped out its path to recovery and this statement is a clear indication of that being delivered.”

Northland Capital, which has an “add” recommendation on the shares, noted that Barratt was making “solid progress” in reshaping its business.

Analyst Simon Brown said: “This [trading statement] shows the benefit of the hard work Barratt’s management has put into stabilising the group’s finances and scale against a now flat but steady level of housing activity.”

Barratt said that by the end of June 2012 its net debt was expected to be at the lower end of its previous guidance, at about £400 million.