Homes slump is over at last, says Barratt

Barratt, Britain's second largest housebuilder, said yesterday the seven- year housing recession had come to an end but warned that recent forecasts for house price rises were "overblown".

Sir Lawrie Barratt, the company's founding chairman, said he expected prices to rise in line with earnings growth, but he acknowledged a return to the North/South divide of the 1980s with prices in London and the South- east rising much faster than in the rest of the country.

Frank Eaton, Barratt's chief executive, added that he expected the return to health of the housing market to continue regardless of which party won the election on 1 May. "The policies regarding housing for both parties are very similar. We believe the recent improvement in the market is set to continue," he added.

Barratt's comments on house prices followed a report earlier this week from the Economic and Social Research Council, which concluded that house prices were being chased up partly by a fundamental flaw in the way surveyors value them as part of the sales process.

Its research found that disclosing the proposed selling price to valuers before they conducted a valuation significantly biased their decision. Valuations tended to "prove" the transaction price, with 70 per cent of valuations matching the agreed price in order to ensure deals went ahead.

Barratt's optimism for the housing market followed a 30 per cent rise in pre-tax profits for the six months to December to pounds 24.8m.

After an 8 per cent rise in earnings per share to 7p, the interim dividend was increased by 9 per cent to 3p.

Barratt's shares, which have recovered from a low of 36p during 1992 after the company plunged into the red and called Sir Lawrie back from retirement to restore its fortunes, closed 3p higher yesterday at 265.5p.

During the period, Barratt completed 3,362 houses, an increase of 12 per cent, and said it was well on track to meet its target of 11,000 houses a year by 2000. This year it expects to complete 7,800 houses compared with last year's 7,000.

The sales were made at an average selling price of pounds 84,200, 3 per cent higher than in the comparable period, which Barratt said reflected a greater proportion of houses sold in the South, where average prices were just over pounds 100,000.

Reservations since the beginning of the year have been running 21 per cent ahead of last year, Barratt said, with advance sales reservations and contracts currently amounting to over pounds 200m.

Investment column, page 26