Barratt enjoys sales surge but cautions on higher build costs for homes

Barratt has developed new homes in areas such as Harrow (Barratt)

Housebuilder Barratt has demonstrated how the residential sector thrived during the pandemic by posting a sales surge, but it cautioned that construction material prices are on the up.

The FTSE 100 firm has joined the long list of companies pointing to supply chain headaches.

Chief executive David Thomas said the industry saw some supplier factories closed last year for lockdowns, causing disruption and backlogs of orders, but there has also been heightened demand for goods. He said prices for bricks and timber have increased.

Barratt said: “We are currently seeing moderate inflationary pressure on skilled labour supply, reflecting the strength of the housebuilding construction recovery balanced with a desire by sub-contractors and skilled trades for future workload visibility.”

The company added: “Reflecting the ongoing strength of the market, we continue to see increases in build costs, currently running at between 4% and 5% and we now expect build cost inflation will be within this range for FY22.”

Figures from the Department for Business, Energy and Industrial Strategy show building material prices rose 4.5% in July compared with June.

But Barratt’s Thomas was upbeat as he cheered “very strong demand for houses”, including in London zones three to six.

The company completed 17,243 home sales in the year to June, up from 12,604 in the prior 12 months, helping to boost revenue by 40.7% to £4.8 billion. It recorded a 65.1% surge in pre-tax profits to £812.2 million.

Part of the previous year was impacted by the start of the Covid crisis, with construction sites closed for a period.

But the industry has seen high demand since July 2020 when a stamp duty holiday came in, and lockdowns led many to consider moving. Stamp duty help is due to finish this month.

Barratt said net private reservations per active sales site between July 2021 and August 22 were 11.7% lower than the same period last year when the initial boom took place, but the figure is still significantly above pre-pandemic levels.

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