Barratt buoyant but says no boom on way

Housing: Builder stays cautious on prospects despite rising profits and volumes as improved market fails to help brick-maker
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Barratt Developments, Britain's second-biggest housebuilder, yesterday struck a cautious note about prospects for the UK housing market, despite reporting results that were the envy of most of its rivals.

Barratt ruled out a return to the boom conditions of the late Eighties and warned that house price increases would only match earnings growth of about 3 to 4 per cent over the next few years. "We do not seek, nor do we expect, any improvement in the very substantial UK housing market," said Sir Lawrie Barratt, chairman.

Frank Eaton, Barratt's chief executive, noted that price rises in the South-east of England, where the housing market is strongest, were now tapering off after increases of up to 10 per cent in London over the last year.

Outside the South-east, Mr Eaton said, the housing market had remained competitive but volumes were now beginning to move ahead, helped by incentives such as part-exchange deals. "Purchaser confidence is now returning," he added.

Barratt's comments came as it posted an 11 per cent rise in pre-tax profits to pounds 52.1m in the year to June, at the top end of analysts' expectations. Shares in Barratt rose 6p to 274.5p.

"Barratt is the only national housebuilder to increase volume completions, pre-tax profits and earnings per share combined, despite the very difficult conditions which continued in the UK housebuilding industry during the year," said Sir Lawrie.

Just over 7,000 homes were sold during the year, a rise of 6 per cent on a year ago, at an average selling price of pounds 83,000, also up 6 per cent.

Barratt expects to sell about 8,000 houses this year, putting it well on course to achieve its target of 11,000 completions by the year 2000. The group revealed that it had made a bid of pounds 52m for housebuilder Admiral, which last week was bought by Bryant for pounds 62m, including pounds 58.0m in assumed debt.

However, Barratt - ranked number two behind Wimpey with a 5 per cent market share - remained sceptical about growing by acquisition in an industry that is rapidly consolidating.

"Shareholders can be assured we will not overpay to take on board problem house-building operations," Sir Lawrie said. Barratt also hit out at "costly delays" in the Government's planning policy, which was causing a shortage of development land and increasing pressure on house prices.

Investment Column, page 20