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New-build housing industry is in ‘Goldilocks territory’

The state of Britain’s property market will return to the fore next week when a clutch of housebuilding giants report.

Full-year figures on Wednesday from Barratt Developments – the UK’s biggest housebuilder – are among the highlights, with figures set to confirm another robust year for the sector.

But the focus will be on expectations for the year ahead amid fears that Brexit uncertainty and pressure on household finances may start to hit buyer confidence.

Barratt: Full-year figures are expected to show strong numbers for the housebuilder. Pictured, flats in Hythe, Kent

The figures will come after government data revealed more homes are being built than at any time during the past nine years.

Some 164,960 new homes were started in the year to June 2017, the highest rolling annual total since 2008, government figures show.

The figure is an increase of more than three-quarters since a low in 2009. 

A detailed trading update in July has already set the scene for strong numbers from Barratt, after it said profit is set to come in ahead of market expectations following sales of more expensive homes.

It upped its outlook for full-year pre-tax profit to rise from £682.3million to around £765million, above the consensus range of £699million to £740million.

Barratt’s average selling price for its homes in the year to June 30 increased by 5.9 per cent to £275,000 and total completions came in at 17,395, up marginally compared with 2016 and the highest level in nine years.

The results show house prices in the new-build sector continue to rise as demand remains strong thanks to the Government’s Help to Buy policies and record low interest rates.

But experts are unsure how long this can last, while there are mounting signs the wider property market is cooling amid sluggish economic growth.

The latest figures from Nationwide Building Society showed house prices dropped by 0.1 per cent in August, signalling that pressure on household finances from Brexit-fuelled inflation is hitting buyer confidence.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said the new-build housing industry is in ‘Goldilocks territory’.

He added: ‘Demand is high, supply is low, Government subsidies are widespread and low interest rates mean mortgages have rarely been as affordable as they are at present. It’s difficult to see how market conditions improve from here.’

Final figures from Redrow on Tuesday and London-focused Berkeley on Wednesday are likely to confirm the sweet spot for the sector.

Berkeley is braced for a shareholder revolt over boardroom payouts totalling £92million – one of the largest pay deals in British corporate history.

But troubled Bovis Homes has proved the exception and new boss Greg Fitzgerald is expected to update on his recovery strategy alongside half-year results on Thursday.

Redrow: Another of the housebuilding giants set to reveal final figures this week

Redrow: Another of the housebuilding giants set to reveal final figures this week

The group was thrown into a crisis when problems with sub-standard build quality saw it inundated with customer complaints.

Former boss David Ritchie stepped down in January after eight years in the role, weeks after warning over profits.

Mr Fitzgerald took on the top job in April to lead a recovery after it saw two aborted takeover attempts from rivals Galliford Try and Redrow launched in the wake of its woes.

The Kent-based group saw profits fall three per cent to £154.7million last year and has had to set aside £10.5million to cover remedial work and compensation for affected customers.

It has since announced a raft of improvement measures and slowed the rate at which it builds homes.

Analysts at Numis believe the first-half figures will continue to make for painful reading.

‘The first-half results will mark a low point for the group, as margins are impacted from lower sales volumes, high build costs carried into the year and the additional administration costs relating to customer care issues,’ they said.