Chief executive David Thomas today told investors that, despite overall positive trading conditions, Stamp Duty incentives were not enough to increase sales on a handful of central London sites. Instead, around six weeks ago the developer took the decision to cut prices by 5-10% on two or three London locations.
In its trading statement Barratt said: “Market conditions in London at higher selling prices remain more challenging. To mitigate these risks we have taken pricing action on a number of our sites in London.”
Thomas told investors that key sites at Blackfriars and Landmark Place are not included in the discounting. He added that the action has already had an effect on demand.
In addition the house builder has exchanged a build and sale agreement on a bespoke development of 39 apartments for a total value of £47m to further “de-risk London delivery”. Thomas said this has resulted in certainty of sale, increased earlier cash flow and has saved the business the cost of setting up a sales team for the units, which comprise an entire site.
He added that stock below £600,000 in Greater London areas such as Catford and West Hendon is experiencing strong demand.
The regions are also performing well. “There is no doubt that northern has been particularly strong. For the North of England and Scotland we are seeing sales trends very significantly up on a year-on-year basis and that is resulting in some pricing improvements,” said Thomas.
Total forward sales including joint ventures have risen by 4.3% to £2,654.3m, with wholly-owned forward sales up by 19.5% to £2,466.1m. The company said consumer demand was strong, supported by good mortgage availability.
Commenting on next week’s Autumn statement, Thomas said government should provide “more of the same”, saying Help to Buy, planning focus and land release are all key contributors to increasing the housing supply.
However, he cautioned against a return to the 1960s prioritisation of quantity over quality. “You have to be focused on quality. We can’t be a situation where the only target is volume. There has to be a balance between the delivery of volume and the delivery of quality.”
Barratt launched 69 new developments in the period 1 July to 13 November. It is currently operating from 385 sites, with average site numbers (including JVs) for the period to date of 370, down 4.1% from 386 last year. This reflects a pause in land acquisition following the EU referendum.