Barratt reports surge in demand for homes after lockdown

House-builder withdraws £175m special dividend payout

The UK's largest housebuilder has reported a surge in demand for new homes post-lockdown but scrapped its special dividend for 2021. 

Barratt Developments said it would withdraw the £175m payout, which would have been paid in November 2021, given the "unprecedented" impact of coronavirus. 

Pre-tax profits plunged 46pc to £491.8m for the year to the end of June, affected by the closure of building sites and the suspension of the housing market at the height of the lockdown between March and June.

Revenues slumped by more than a quarter to £3.4bn, while it built 12,604 homes during the year, compared to 17,856 the year before. 

However the FTSE 100 company, led by David Thomas, reported an upbeat outlook, saying forward sales and home completion volumes for the eight weeks to Aug 23 were “encouraging” and ahead of last year.

Completion volumes for the period increased 62pc to 1,439 homes, while total forward sales, including joint ventures, stood at 15,660 homes, valued at £3.7bn.

Barratt said increased activity levels were driven by a combination of pent-up demand, a holiday on stamp duty and  buyers trying to get ahead of the looming restrictions to the Government subsidy scheme Help to Buy. 

However, chairman John Allan warned of a reduction in high loan-to-value mortgage lending, which might restrict access to the housing ladder. 

"This has arisen post Covid-19 and reflects a response to a perceived increase in risk and high levels of demand," he said. 

"The restriction and removal of Help to Buy will exacerbate this. It is important that lenders and the Government consider what further options are available to help potential first-time buyers who want to purchase their own home."

Mr Thomas said the business was entering the new financial year "with cautious optimism", adding: “We are now renewing our focus on [...] supporting jobs and economic growth by building the homes the country needs.”

The housebuilder relied on the taxpayer to pay some furloughed employees' wages during lockdown through the Coronavirus Job Retention Scheme, but in July paid back the £26m it had claimed via the scheme, given the strength of its finances.  

Barratt, which had already scrapped dividends for 2020 in March, said shareholder payouts would be reimplemented “when the time is right”. Analysts at Peel Hunt anticipate it could pay 20p a share in 2021. 

Rival Persimmon restored its dividend in August as it reported an "excellent start" to the first half of the year. 

Nationwide Building Society this morning  reported that house prices hit an all-time high in August, rising 2pc on the previous month.

Mortgage lending overall is also picking up, with Bank of England data this week showing approvals rose to 66,300 in July from just under 40,000 in June. That is seven times higher than their coronavirus pandemic low of barely more than 9,000 in May. 

Analysts at Peel Hunt said of Barratt: “While these results are materially weaker than some others in the sector, the group has chosen to take a cautious approach to health and safety and site reopenings.

“The group has set out some medium-term targets they are fairly similar to previous targets, and the focus in the next six-12 months will be on short-term trading volumes.”

Shares jumped 7pc to 540.20p in lunchtime trading.