Buy-to-let sales have risen sharply in the past six months

Landlord Expert
By Landlord Expert September 20, 2011 16:11

Sales to investors have been in decline since 2007 when the buy to let boom turned to bust. But Barratt, the UK’s biggest housebuilder by volume said the trend reversed in the first six months of this year as sales to investors, mostly in the UK, rose about 25 per cent on the same period in 2010.

“The direction of travel has changed quickly. Cash-rich buyers with substantial equity – maybe 60 per cent – are coming back to the market,” said Mike Clare, group chief executive as the company reported its results for the year to the end of June. “Rental yields are continuing to move up so any site near transport links in London is selling.”

Rents have been rising sharply in London as would-be buyers struggle to get mortgage finance and are forced to lease properties instead. The group said it was targeting buy-to-let investors as a result, with rental yields in London as high as 7 or 8 per cent.


With younger buyers in short supply, the group is also switching from developing flats to higher margin family houses. Houses are expected to account for 70 per cent of Barratt sales next year, up from 35 per cent in 2007. “We’re building for those that can get access to finance,” Mr Clare said.


Revenues were flat, but the shift to family houses helped the group slash full-year losses from £162.9m to £11.5m. Although the number of homes sold dipped to 11,171, the average sales price rose 7.4 per cent from £185,200 to £198,900.


Operating profits jumped by 50 per cent to £135m as average building costs fell 1.4 per cent. The group has improved margins by building on sites bought cheaply in 2009.

Barratt said it had also managed to reduce build costs by negotiating heavily with suppliers and by standardising products. A new range of family-style homes, which combine traditional exteriors with modern open-plan interiors, is being showcased in Leeds and Bristol this month.


The housebuilder said it hoped this would drive selling prices higher this year. But it warned that the market continued to be constrained by the dearth of first time buyers.

Barratt, along with rival housebuilders Redrow and Bovis, is in talks with banks to encourage them to ease mortgage restrictions, particularly on new build properties where they typically demand a loan to value of 80 per cent against 90 per cent for older homes.


Barratt reported a full year loss per share of 1.4p. The company has not paid a dividend since 2008, and said it would not resume payments until market conditions improved. It ended the year with net debt of £323m.


The shares closed up 0.6p at 76.75p.



Landlord Expert
By Landlord Expert September 20, 2011 16:11

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