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UPDATE - Barratt Developments bullish as strong housing demand continues

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“The new government has identified increasing housing as an important priority area, and we are committed to playing our part,” said Barratt boss Mark Clare.

--adds detail, broker comment, updates share price--

Barratt Developments (LON:BDEV) said demand for new build homes is holding up as it reported a double digit growth in sales.

The house builder, the UK's largest by volume, cited strong market conditions as it posted an 18% rise in total forward sales to £2.6bn in the 19 weeks to 10 May.

It also upgraded its expectations for the number of homes it will sell this year to 16,000, ahead of previous guidance.

This bullish outlook is due to high levels of interest in its newest estates as well as its older, less profitable sites.

Mark Clare, chief executive, hailed an improved mortgage market which is supporting demand.

He added that last week’s Conservative victory in UK election creates a supportive environment in terms of a continuation of the Help to Buy scheme, and improvements to the planning system.  

“The new government has identified increasing housing as an important priority area, and we are committed to playing our part,” said Clare.

The group launched 64 new developments in the period across the UK and currently operates from 404 active sites.

“We expect to see further controlled growth in site numbers in FY16,” the firm added.

“The market remains positive and we expect to enter the new financial year with a strong forward order book. 

“We are confident the group will deliver a significant improvement in performance for the full year and make further good progress towards achieving  FY17 targets of a gross margin of at least 20%.”

Helal Miah, investment research analyst at The Share Centre, said what was pleasing is the fact that demand for new housing is spread across the country and not just in the South East. 

“The group is making progress on securing strategic land with 9,900 plots approved year to date and continue to target a 4.5 year land bank.

“We believe that demand for housing, and therefore the house builders, to continue to do well in the short to medium term, supported by the ongoing housing shortage, attractive mortgage rates and government policy.”

The Share Centre kept its hold recommendation on Barratt but said it would not discourage investors from buying the shares. However, its preferred stock in the sector is Taylor Wimpey (LON:TLW).”

Shares were 21p higher at 566p.

Quick facts: Barratt Developments

Price: 668.6 GBX

LSE:BDEV
Market: LSE
Market Cap: £6.81 billion
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