Barratt Developments' share price is slight higher after the company posted a respectable set of first-half figures.
Pre-tax profit edged up by 3.7% to £423 million, while revenue increased by 6.29%. The housebuilder anticipates generating roughly £30 million in profit from joint ventures in 2020. Barratt confirmed the full-year outlook is still broadly in line with management’s expectations, and that was reflected in the forward sales which were fractionally higher than last year.
Help-to-buy gives Barratt's share price lift-off
The company has benefited greatly from the government's help-to-buy scheme, and it is banking on further assistance from Westminster, especially on the back of the Conservative party's win at the back end of last year. The scheme was announced in March 2013, and since then the Barratt Developments share price has increased by in excess of 200%. The impressive rally in the stock can’t all be attributed to the policy, but it has certainly been a factor. There has been chatter the Conservative party will reveal pro-business polices in its Budget, which will be announced next month. Housing has been a hot topic in UK politics in recent years, so political parties like the Conservatives are keen to get younger people on the property ladder.
Even though there has been a cooling of the property market in London, Barratt have still being seeing sales rise in Scotland as well as parts of England. In a bid to temper expectations, the company has cautioned that sales are likely to cool. In October the group released a largely optimistic statement covering the 14-month period until mid-October, as the number of completions increased by 14%.
General election outcome boosts housebuilders
Barratt Development’s share price has enjoyed a great run recently, and today it has hit a fresh record-high. The stock jumped on the back of the decisive Conservative party win in December's general election. On the run up to the election, some people were fearful a Labour party win would trigger a massive capital flight from the UK, so the sizeable win for Boris Johnson’s party sparked renewed interest in the housebuilding sector. Last week we heard from Crest Nicholson as well as McCarthy & Stone, who both said there has been an increase in client interest since the election results, so it seems that potential house buyers are keen to buy into the market.
Mortgages rates set to remain competitive
At the end of last month the Bank of England (BoE) voted 7-2 to keep UK interest rates on hold. There was speculation about the possibility of a rate cut in the run up to the meeting, but a clear majority of central bankers voted to maintain the current policy. The BoE lowered its growth forecast for 2020 to 0.8% from 1.2%, so it looks at if rates won’t be rising anytime soon, and therefore mortgage rates should stay relatively cheap.
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