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Barratt chief warns on house prices and calls for rate cuts
Hugo Duncan, Evening Standard27 Feb 2008
The head of one of Britain's biggest builders today warned that house prices will remain flat for the next 18 months and called for further interest rate cuts to prop up the market.
Barratt Developments chief executive Mark Clare forecast business would be tough as buyers and sellers delayed deals.
"I am expecting something like flat prices for the full financial year [to the end of June], and I wouldn't assume it would be very different in the next financial year," said Clare. "It depends on what happens in the markets."
After a grim six months to New Year's Eve as a result of Northern Rock, the liquidity squeeze and higher mortgage costs, Clare said conditions have recently improved slightly after two interest rate cuts, and hopes that more are on the way.
"The indications are fairly strong that we will see further interest rate reductions in the future and that can only help," he said.
Barratt said first-half profits rose 10.2% to £194.6 million, boosted by the £2.2 billion takeover of rival Wilson Bowden in April. Including Wilson Bowden figures, the number of houses sold grew 25.7% to 9056 and the average selling price increased from £165,000 to £178,000.
However, without the help of its new acquisition, which sells more-expensive homes, completions were down 14.8% and prices were little changed. Visitors to Barratt's showrooms fell 26% in the first half and 13% in the first seven weeks of the second half.
Reservation levels have tumbled, and Barratt's forward order book is now 7% lower than it was 12 months ago, at £1.62 billion.
Barratt shares have crashed from a high of 1289p early last year to as low as 326¾p last month. They today rose 15¼p to 439p.
