Leading housebuilders see demand improving

By James Thompson

Two of the UK's biggest housebuilders said that conditions in the troubled housing market were stabilising, but Barratt Developments and Redrow warned that a chronic lack of mortgage availability could derail a recovery.

Both have witnessed an improvement in demand, driven by lower prices and interest rates, as well as recovering confidence, in the market in recent months. Mark Clare, Barratts' chief executive, said: "During the last six months, the early signs of stability we saw at the start of 2009 in the housing market have continued, underpinned by limited stock and improved customer sentiment. We have seen higher sales rates, lower cancellations and prices levelling."

Despite this upbeat tone, Barratt said completed house sales fell by 29 per cent to 13,202 for the year to 30 June, in line with expectations. Its average selling price for private homes tumbled by 19 per cent to £166,000, down from £205,400 the previous year.

As of 30 June, Barratt said forward sales totalled £464.3m, compared with £697.6m last year, but since the end of December the value of its forward order book has remained stable. Barratt reduced its net debt by £370m to £1.28bn as of 30 June 2009.

But Mr Clare warned that a sustained improvement in trading conditions would not occur without a recovery in mortgage availability, while rival Redrow said that it was crucial to a recovery in the wider economy.

Steve Morgan, chairman of Redrow, said: "The most significant concern to the industry remains the chronic shortage of mortgage supply, exacerbated by the widespread practice of down valuations by surveyors representing mortgage lenders. Without doubt this is a major obstacle to the recovery of the housing market, and we are of the view that resolving this issue can play a significant role in the recovery of the economy as a whole."

While Redrow's forward sales only fell marginally, its overall message was mixed, and it warned that its trading results would be at the lower end of analysts' forecasts. For the 12 months to 30 June, the builder said completed home sales tumbled 46 per cent to 2,113, compared with 3,925 the year before. Over the year, the average selling price tumbled to £137,500 from £156,900.

Redrow has undertaken a review of all aspects of the business, including sales, product and construction. It said that total forward sales on 30 June were down by only 42 to 1,147. Of these, private sales jumped by 22 per cent to 600, up from 492.

Barratt has closed its final salary pension scheme from 1 July to all current employees, which will affect 350 staff, who will be moved on to a contributory scheme. The housebuilder joined the grocer Morrisons and the bank Barclays which have taken similar action over recent months. Barratt had already closed its final salary scheme for new employees.