After some initial colly-wobbles following the budget announcement of a taper down in mortgage tax relief in the buy-to-let segment, housebuilders recover as investors put continuously rising demand in perspective.

The rebound in UK housebuilders is also being supported by data from the Royal Institution of Chartered Surveyors (RICS) which suggests that house prices rose at their fastest rate in almost a year last month.

While the likes of Persimmon (PSN) and Taylor Wimpey (TW.) are leading the rally in the FTSE 100, a solid interim management statement from Barratt Developments (BDEV) highlights the robust fundamentals that have supported the sector – particularly since the General Election in May.


Following the budget on 8 July, Barratt saw share price dwindle by 5.7% as the markets mulled the likely impact of tax changes to the buy-to-let segment.

But news of a 45% increase in profit before tax driven by growth in completions and a rising average selling price in the year to the end of June sees shares in the £5.8 billion cap recouping 3.2% to 613.5p.

Looking ahead, Barratt can point to a strong order book with forward sales position at the end of June 29.6% higher than June 2014 at £1,771.3 million, and 28.8% higher on a volume basis. This, according Davy Research, leaves the company c.26% forward sold for the full year 2015/16.

Landbank at the group remains strong with 4.5 years of supply locked in. Furthermore, Barratt assures investors that it continues to secure sites at or above its hurdle rates (20% gross margin, 25% ROCE).

Issue Date: 09 Jul 2015