The Investment Column: Barratt builds on housing recovery

BARRATT's results wouldn't be the same without an outburst against the Government. Now Sir Lawrie Barratt, the old war horse of the housing industry, has stepped down, it was left up to Frank Eaton, his successor, to have a rant at how house buyers are being victimised by the powers that be. But Barratt has little to complain about.

The housing market is going great guns at the moment. Mortgage interest tax relief may go and interest rates will probably rise further. However, houses are more affordable now than they have been for some time. The Government's prudent stance on the economy have seen long-term interest rates fall to new lows, stimulating cut-price deals from lenders.

When Sir Lawrie stepped down last time the company promptly went downhill as the recession brought the industry to its knees. But history is unlikely to repeat itself.

The industry is still cyclical and will struggle to grow at the cracking pace it has set over the last few years. That said, as long as the economy does not get out of control, the housing market should continue to grow at, say, 3 to 4 per cent a year.

Barratt has capitalised on the good times by expanding its presence in the South-east, which has shown by far the fastest growth in the UK. Just as importantly, it has been able to keep costs under control.

Wage demands and land costs have ballooned over the last 12 months but Barratt has proved better than most at keeping a lid on expenses. That helped profits for the six months to December rise 38 per cent to pounds 34.1m.

Barratt remains one of the best run businesses in the sector. Barratt is on track to build 8,000 homes in this financial year and maintain its double-digit volume growth. That means, barring the sort of crash last seen in the early 1990's, Barratt looks set fair for the next few years.

Barratt's shares and the house building sector have both staged a comeback over the last few months. The shares rose another 13p to 319p yesterday. Analysts forecast full-year profits of pounds 90m, putting the shares on a prospective price-earnings ratio of 12. Some housing stocks are beginning to look a bit pricey but Barratt remains good value.