Barratt houses boosted by stamp duty holiday

LaToya Harding
·Contributor
·3-min read
A Barratt housing development near Haywards Heath, England. Photo: Peter Nicholls/Reuters
A Barratt housing development near Haywards Heath, England. Photo: Peter Nicholls/Reuters

Housebuilder Barratt Developments (BDEV.L) received a boost from investors on Friday after it revealed it sold over 9,000 homes in the first half of the year on the back of the stamp duty holiday.

The FTSE 100 (^FTSE) company said its sales rate over the six month period to 31 December was up 11.6%, also boosted by pent-up demand from the first national lockdown and the March 2021 Help to Buy scheme for existing homeowners.

It completed sales on 9,077 homes compared with 8,314 a year earlier and said that forward sales, which includes sales via joint ventures, had increased 14.3% to 13,588 homes, totalling £3.2bn ($4.3bn).

The news sent shares 4.5% higher in early trade.

Barratt Development shares climbed on Friday on the back of the positive news. Chart: Yahoo Finance
Barratt Development shares climbed on Friday on the back of the positive news. Chart: Yahoo Finance

For the 12 months to 30 June, the housebuilder, which is one of the largest in the UK, expects wholly-owned sales to be between 15,250 and 15,750 homes.

The firm added that it was also “mindful of the continued economic uncertainties arising from COVID-19 and the UK's new trading arrangement with the EU.”

David Thomas, chief executive, said: “Despite the ongoing challenges presented by the pandemic, we are confident that our operating performance and strong financial position provide us with the resilience and flexibility to respond to the operating environment in FY21 [financial year 2021] and beyond.”

Barratt expects to resume shareholder payouts at its interim results next month, reporting a strong net cash position of £1.1m ($1.5m) from £308.2m last June.

During the first national lockdown the UK property market came to a total shutdown as people had to stay at home to curb the spread of COVID-19. This included orders to avoid moving house as well as house viewing postponements. A number of construction sites were also temporarily closed.

As restrictions eased later in the year chancellor Rishi Sunak announced a suspension of stamp duty on property sales of up to £500,000 until March 2021.

READ MORE: How the new lockdown may help the UK housing market in the short term

Barratt confirmed that its construction sites are able to remain open during the current third national lockdown and that sales offices are open on an appointment basis in England and Scotland. However, they are closed in Wales.

The UK housing market is expected to cool this spring with the stamp duty holiday ending and the existing Help to Buy scheme tapering.

Richard Hunter, head of markets at Interactive Investor, said: “The strength of the trading update and the resumption of the dividend next month have been warmly received, as Barratts continues to plough on regardless.

“A small fly in the ointment has seen Barratts becoming something of a victim of its own success, in that the second half of the year will require a switch to concentrating on building activity rather than completions, as the company replenishes its stock.

“Despite a recent rally, the shares remain down by 9% over the last year, as compared to a drop of 13% for the wider FTSE100 index. Appetite for the stock remains undiminished, however, with the market consensus of the shares as a strong buy underlining Barratts’ position as the preferred play in the sector.”

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