Still business as usual for Barratt Homes

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Despite the fact that many had predicted a post Brexit downturn for the UK housing market this has yet to materialise. Indeed today we saw the U.K.’s leading developer Barratt Homes announce pre-tax profits up by 20.7% to just over £682 million. This figure is for the year to June 30, 2016 over which period the company delivered 17,300 homes. This is a record for the company and, despite many predicting a difficult time for the UK property market, it seems to be business as usual.

Average selling price

It is always interesting to see how house prices perform under very challenging economic conditions. The average selling price for Barratt came in at £289,800 which was a 10.4% increase. Total revenue hit £3.8 billion although the increase in average selling price may have been positively impacted by a different mix of property types. However, the general consensus does seem to be business as usual even though Barratt Homes was one of the first UK housebuilders to suggest the need for a post Brexit contingency plan.

Current demand

While the historic figures for Barratt Homes are very impressive perhaps the fact that like for like sale are up by  4.1% since the beginning of July is even more encouraging. This is the exact time when many believed the UK property market would fall under a cloud, struggle to move forward and finance would be difficult to obtain. Even though the company has warned that the number of completions for the current financial year will only show modest growth over last year the fact the company is still expecting growth is encouraging.

This is probably an opportune moment to mention the UK government’s Help to Buy scheme which is having a greater influence on the marketplace than any concerns over Brexit. When you also bear in mind the chronic shortage of new house builds across the UK, something which has been ongoing for many years, there is still an awful lot of slack to take up.

London prices softening

It was interesting to see Barratt commenting on the London property market which many believe will be impacted more than most by the issue of Brexit. The company confirmed there has been a slowdown in demand especially for houses valued over the £600,000 limit at which the Help to Buy scheme falls away. The London property market has always been the more susceptible to short-term fluctuations in sentiment and demand but more often than not it tends to bounce back even stronger.

At some point, once the concern and confusion regarding Brexit diminishes, we will probably see more overseas investors taking advantage of the recent fall in the value of the UK pound. London has always been something of a magnet for overseas investors looking to add to their property portfolios and this is unlikely to change in the longer term.

Conclusion

There is a trend emerging in the UK housebuilding sector which suggests that cautious comments about Brexit may have been overdone. However, while recent developments have been encouraging for investors, there is still a long way to go before the UK formally quits the European Union. There will be lots of speculation, rumours and counter rumours before we finally know what the endgame will be.

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