Barratt says lack of mortgages still key constraint

Published 12th Jan 2011

Housebuilder Barratt Developments reported a 4.4 percent fall in first-half completions, partly offset by higher prices and margins, and said low mortgage availability remained its biggest problem.

"Last year's Autumn selling season was particularly bad. Therefore, it is important we get ourselves going as fast as we can with those sales in the next selling season," chief executive Mark Clare told reporters on Wednesday.

"Mortgage lending remains at unusually low levels and we view this restricted availability of mortgage finance as continuing to be the key constraint on market growth in the near term," the company said.

Barratt, one of the larger volume homebuilders, said first-half completions fell to 4,832 units, driven by a dip in private completions. The average selling price rose 6 percent to 176,000 pounds, leaving revenues flat at around 875 million and the operating margin at 5 percent from 2.4 percent.

British housebuilders are contending with consumer sentiment hit by higher taxes, government spending cuts, and a dearth of mortgage availability, particularly for first-time buyers.

Bad weather hit sales in December, normally a quiet month for the industry.

"The trading environment in Barratt's H2 needs to show a decent pick-up and this is by no means assured," said Robin Hardy at Peel Hunt, lowering its full-year profit estimate.

"While there is a decent forward sales carry out of H1 and there will be site openings, there still needs to be a strong spring selling season to provide required volume for the year."

Barratt echoed comment from rival Persimmon that the first few days of the key Spring selling season had been encouraging, adding it was too early to extrapolate.

On Monday, Persimmon was cautious on the outlook for 2011, particularly on prices, when forecasting its underlying 2010 pretax profit would be at the top end of expectations.

Also on Monday, leading mortgage provider Halifax said prices fell 1.3 percent in December and the current market "does not seem to have much going for it.

Barratt said volumes would continue to be squeezed.

"Whilst the group will benefit from the opening of approximately 110 sites during the second half, we anticipate that any volume growth for the year will be limited," it said.

To combat restrictions on mortgage lending, Barratt announced a tie-up with Hitachi Capital (UK) to launch a product allowing parents to borrow money to help their children onto the property ladder.

Source: ' 'Reuters' '

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