Barratt Developments has said strong demand for houses helped to boost annual profits by nearly two-thirds in its latest financial year, as it signalled continued strong demand for housing across the UK even as the government withdrew coronavirus pandemic support.
Britain’s second-largest housebuilder by market value reported profits before tax of £810m for the year to the end of June, compared with £490m in the previous year, and said a strong forward sales book was encouraging for the year ahead.
It also said the strength of the recovery meant it had experienced “moderate inflationary pressure on skilled labour supply”, and that build costs were rising by between 4% and 5% annually. However, it had not seen significant material cost increases, mainly because of long-term contracts that will see it through to the end of the year.
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The UK housing market has gone through a period of extraordinary growth during the pandemic, as an initial freeze on purchases during the first lockdown was replaced by a buying frenzy that has pushed prices to record highs. Prices rose by 11% in the year to August, according to data published on Wednesday by Nationwide, Britain’s second-largest mortgage lender.
While the economy slumped at the start of the crisis, the housing market has boomed in part because of wage support schemes that prevented a large increase in unemployment, and also because of historically low borrowing costs and a rush for more space during the pandemic. At the same time, the UK chancellor, Rishi Sunak, in brought in a temporary stamp duty holiday in July 2020 that is thought to have added to builders’ profits. The measure was partially withdrawn in July, and will end completely on 1 October.
Barratt’s revenues for the financial year were £4.8bn, only 1% lower than the equivalent in 2019, before the effects of the pandemic. The builderr completed 17,200 houses, only 600 behind 2019 and 4,600 ahead of the 2020 financial year, which included the first national lockdown.
David Thomas, Barratt’s chief executive, said the company had made “excellent progress this year”.
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He said: “We have begun the new financial year in a strong position and, while there are still uncertainties ahead, our strong balance sheet, forward order book visibility and construction activity to date all stand us in good stead. There is very strong demand for houses across the country.”
The FTSE 100 housebuilder said trading in July and August remained strong, with 277 net private reservations for houses per week. That compared with 250 in the year to June 2020, and 314 in the 2021 period, which was boosted by pent-up demand. Barratt said it aimed to build more homes than in the 2019 financial year in 2022.
Charlie Campbell, an analyst at Liberum, an investment bank, said: “We see upside in the housebuilders as continued good news on trading should trump the market’s fears, which we think are overdone.”