© The Herald
Originally published: 24.11.2011

BARRATT Developments, the UK's largest house builder, said yesterday that it continues to turn in a strong performance in Scotland despite bleak economic conditions.

Doug McLeod, who heads Barratt's operations in Scotland, told The Herald: "We are bucking the market trend north of the Border. We are doing well."

He said the builder's Scottish sales are up 27% year-on-year and average house prices have risen by 2% during the same period to around £180,000.

On the downside, Mr McLeod noted that first-time buyers are still having difficulties obtaining mortgages from lenders.

"Financing is the biggest issue facing our customers," he stated, adding that Barratt has schemes to help potential buyers.

The group offers first-time buyers its Head Start scheme which is designed for homebuyers who want to get on the housing ladder as soon as possible but don't have the large deposit required by some lenders.

With Head Start, first-time buyers can purchase a new Barratt home for just 85% of the asking price, with an 80% mortgage and a 5% deposit. The remaining 15% is paid back, interest free, after 10 years or when the property is sold – whichever comes sooner.

Barratt also said it has completed the first house in its upmarket development in Newton Mearns, near Glasgow, and is building a range of new homes, called Aspirations, at two of its East Kilbride developments.

Looking at the UK as a whole, Barratt said in a trading update that weekly reservations had risen by 25.9% since July, with the average selling price of a house up 7% to £207,000.

Barratt, which also trades as David Wilson and Ward Homes, said underlying property prices remained "stable", with London and the south-east proving the most resilient.

The group, which returned to profit earlier this year after house prices slumped in the recession, said it expects a significant improvement in full-year profits as it benefits from selling homes at new sites on higher margin land.

Chief executive Mark Clare said: "We think it's been a pretty good start to the year. There have been good sales rates across all the regions.

"The first 20 weeks have shown consumers are actually buying and we have been surprised at the strength of demand given the economic news."

But he called on lenders to reduce the level of deposits they demand to 10% of a property’s value, compared to the 20% that is currently common.

Barratt announced that net debt at the year end would be at the lower end of previous guidance, at about £400m. The house builder has been buying cheaper land throughout the downturn, so the houses built on these new plots should be higher margin.

In a research note, Panmure analyst Rachael Waring said Barratt had reported a strong management statement and the increase in private reservations was an improvement on the 10% improvement seen in the first few weeks of the year.

"Breaking this down, the group appears to be operating from 9% more sites, and has seen a 17% improvement in the sales rate," she said.