Barratt and Bovis warn of mortgage drag on recovery

Aaron Morby 11 years ago
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The country’s largest volume house builder said sales rates have returned to normal levels since the start of the year.

Rival Bovis Homes also reported a more stable market with visitor numbers to sites 20% ahead  of last year.

But trading statements from both firms warned that lack of mortgages for new build would constrain a significant recovery in house building levels.

Bovis said the housing market continued to operate well below historical activity levels and warned that without an improved availability of mortgage finance it expected to see constrained market activity.

Barratt said sales rates had returned to more normal levels in the period from January 1 to May 8, with a 4% increase in private selling prices on the same period a year ago, driven by changes in its sales mix.

But Clare warned that although encouraged by the relative stability of the housing market since the beginning of January, activity was likely to remain constrained due to continued lack of mortgage products in the new build sector.

Barratt also reported it had refinanced its debts after a grueling six months of talk with banks.

The new £1bn deal cuts the cost of debt financing and puts the house builder on a more secure footing to increase building sites.

The house builder said it was on course now to make a substantial improvement in operating profit.

This would being driven by higher margin sites and a committed cost cutting drive.

Barratt opened 55 new sites in the period and expects to open a further 24 by the end of the financial year.

Mark Clare, group chief executive of Barratt Developments said: “We are encouraged by the improvement in market conditions we’ve seen since the start of 2011, following a challenging autumn period.

“Our strategy for recovery is progressing well and we continue to expect a substantial increase in operating profit in our second half.

“The successful refinancing provides a strong platform for the business and will enable us to reduce the effective cost of financing going forward.”

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