Housebuilding giant Barratt plays down supply chain pressures but building costs to rise

Barratt Developments has not measured any significant impact on its construction plans due to much-publicised problems in UK supply chains.

Wednesday, 13th October 2021, 9:14 am
Updated Wednesday, 13th October 2021, 9:14 am

The housebuilder told investors that it was still on track to complete between 17,000 and 17,250 homes in the current financial year, which ends next June.

Barratt said that it has noticed "some macroeconomic uncertainty", but its financial position is strong enough to react to changes this year.

Chief executive David Thomas said: "We continue to work closely with our suppliers and sub-contractors and have not experienced any significant disruption to our build programme as a result of the challenging supply chain environment.”

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Housebuilders have found themselves in somewhat of a sweet spot during the pandemic amid lockdowns and the switch to home working with strong demand for larger family homes with gardens. Picture: Rui Vieira/PA Wire

In a trading update, the firm added that its building sites are continuing to operate across the country, with construction in line with plans.

But the cost of building will increase by between 4 per cent and 5 per cent during the current financial year.

Reservations per site dropped by 2.3 per cent in the last three months compared with the same period a year ago.

But the firm stressed that a year ago buyers could benefit from a stamp duty holiday and Help to Buy.

The more relevant comparison is the same period in 2019, Barratt noted, and when compared to that time, reservations are now 18 per cent higher.

Stamp duty holidays were completely removed last month, while Help to Buy was tapered in December last year to exclude existing homebuyers and include regional price caps.

The impact has been clear. In the last three months 21 per cent of buyers were using Help to Buy, down from 45 per cent two years ago and 51 per cent last year.

"The positive start to the new financial year has continued in recent weeks with private reservations remaining strong," Thomas said.

"This is particularly encouraging given the significant year-on-year reduction in Help to Buy reservations and the ending of the stamp duty holiday.”

He added: "We remain on track to deliver both our (2022 financial year) and medium-term targets set out in the (2021 financial year) results, whilst maintaining our commitment to leading the industry in the quality and sustainability of our homes and in customer service.”

Laura Hoy, equity analyst at financial services group Hargreaves Lansdown, said: “The housebuilders have found themselves in somewhat of a sweet spot. While pent-up lockdown demand is starting to wane, people are still motivated to move and that’s driven house prices higher.

“According to Barratt, that’s been enough to offset build cost inflation, and the group’s not expecting to deliver any downside surprises this year.

“Supply chain constraints were called out as an industry-wide issue, but Barratt confirmed that so far the logjams impacting several other sectors have yet to throw a wrench in the group’s plans.”

She added: “We’re cautiously optimistic about Barratt’s performance so far. But the group’s success rests on the UK housing market continuing to defy gravity as buyers bid house prices ever higher. At some point, the number of buyers at higher prices will dry up.”

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