The boss of Britain’s biggest housebuilder says things continue to look up despite the worsening situation with Covid-19.
David Thomas, chief executive of Barratt Developments, said sales over the last three months were up on the same time last year – after the business lost more than £1.3 billion in sales as a result of the spring lockdown.
He said Barratt, which holds its annual general meeting today, was launching new developments as it worked to build up sales and help the Government’s new homes targets.
However he warned that while interest rates remained historically low, mortgage deals were getting tighter.
He said house completions would continue to grow – assuming there were no more national lockdowns.
Mr Thomas said around half of its recent customers had used the outgoing Help to Buy scheme, which was up on this time last year.
Since the summer it had built more than 4,000 new homes – 24 per cent up on the same period last year.
It also has more than 15,000 forward sales on its accounts, worth £3.65 billion, compared to 13,000 a year ago, worth less than £3.1 billion.
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Formed in Newcastle in 1958 and now based in Coalville, Leicestershire – Barratt Developments is the parent company of Barratt Homes, David Wilson and Barratt London.
It also owns Wilson Bowden, which builds industrial and office buildings, as well as retail and leisure sites.
Mr Thomas said: “Health and safety remains our number one priority and we remain focused on keeping our people safe while we rebuild completion volumes, bring further operational improvements to our business, and deliver on our commitment to build the highest quality homes across the country.
“There is continuing strong customer demand for our homes and we have a healthy forward order book.
“As we look ahead, whilst significant economic and political uncertainties persist, we believe our disciplined approach and strong balance sheet provide us with the resilience and flexibility to react positively to future challenges.
“Our sites continue to operate safely and successfully across the country, including areas of local lockdown, enabled by our extensive Covid-19 working practices and protocols.
“Construction activity remains in line with planned output, with an average of 294 equivalent homes constructed per week in the period.
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“The Government is targeting the construction of 300,000 homes a year by the mid-2020s to meet existing demand.
“We note the Government’s continued focus on speeding up and simplifying the planning system and ensuring that local authorities plan positively for housing growth in their areas.
“Whilst mortgage rates remain relatively attractive, since the pandemic there has been a material change in loan to value (LTV) lending criteria with no mainstream mortgage lenders providing mortgages at 95 per cent LTV for new build homebuyers, increasing the reliance of first time buyers on Help to Buy.“
Mr Thomas said Barratt remained financially strong with £520 million in the bank and an undrawn credit facility of £700 million.
He said: “We are focused on rebuilding our completion volumes to our medium term target and capacity of 20,000 homes.
“Based on current market conditions, construction activity levels and assuming no further national lockdowns creating disruption to our construction sites, we continue to expect to grow wholly owned completions to between 14,500 and 15,000 homes in this financial year, and in addition deliver around 650 completions from our joint ventures, whilst ensuring we maintain our industry leading standards of quality and service.
“Whilst there continues to be economic and political uncertainty, the group is in a strong position.
“We have a substantial net cash balance, a well-capitalised balance sheet, a healthy forward sales position, a continued focus on delivery of operational improvements across our business and an ongoing commitment to deliver high quality homes across the country.”
Shares in the FTSE 100 business were up around 1.5 per cent at £5.50.
Russ Mould, investment director at online stockbroker AJ Bell said the housing market was enjoying a major tailwind thanks to temporary stamp duty relief and Barratt was no exception.
He said: “These figures show that Covid-19 is not preventing the construction of new properties nor consumers’ willingness to make what could be the biggest financial transaction in their lives.
“The Government seems intent on finding ways to help people onto the housing ladder and that’s good news for Barratt whose customer base is heavily weighted towards first-time buyers.
“Approximately half of Barratt’s customer base in the past quarter used the Help to Buy scheme and three quarters of those people were first-time buyers.
“Help to Buy changes from April 2021 whereby the scheme will be restricted to first-time buyers.
“Barratt might be less affected than some of its peers but it will still have a sizeable chunk of its potential customer base which will need to find alternative ways of facilitating a property purchase. Part-exchange is one option.
“Help to Buy has acted like a monster pack of Duracell batteries, fuelling housebuilders since its launch in 2013.
“It’s no wonder the housebuilding industry has been calling for the Government to extend the scheme in its current form.
“The end of the stamp duty relief next March will also test the broader property sector with fears that the current surge in activity has simply brought forward transactions and so we could see a lull in the usual spring selling season.
“Boris Johnson has talked about a desire for banks to offer 95 per cent mortgages with the Government potentially acting as a partial guarantor.
“We’re still short on detail but the Prime Minister seems to think this policy could create 2 million more homeowners.
“That’s music to the ears of a business like Barratt.
“What seems almost certain is that Mr Johnson and his colleagues will find some way of keeping the property dream alive and for Barratt that means it is worth keeping the cupboard stocked with hammers and nails so it can churn out more homes.”