Barratt loss on house market woes

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UK housebuilder Barratt Developments has reported a loss of almost £600m in the second half of 2008 after having to write down the value of land it owns.

It saw a pre-tax loss of £592.4m, down from a £192.4m profit a year earlier.

Though it said there were "some signs" of increased activity in the housing market, it added mortgage availability was hampering demand for new homes.

The results came a day after rival Redrow also said it had fallen from a profit to a loss in the same period.

'Intensely difficult'

The bulk of Barratt's losses came from a £494.9m impairment charge on the value of its land bank - because of falling property values and shrinking demand for homes.

"Whilst there still appears to be a strength of demand for new homes, especially against the backdrop of very low production levels, without access to finance, this is unlikely to deliver any short-term respite to the industry," the company said.

Although the news is bad, expectations were already extremely low Keith Bowman Hargreaves Lansdown Stockbrokers

Barratt added the housing market was "intensely difficult", with its average selling prices having dropped by almost 10% to £160,700 over the period.

Since the peak of the housing market in June 2007, average house prices had fallen by about 27%, Barratt said.

But the gloomy results at the housebuilder - which was left saddled with debt from its acquisition of Wilson Bowden in 2007 - had been largely predicted.

And news that it was operating within its banking covenants and had "no plans" to raise extra cash through a rights issue this year sent shares 14% higher by mid-morning on Wednesday.

Savings plan

"Although the news is bad, expectations were already extremely low," said Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers.

"Nonetheless, whilst the group's near-term position has been stabilised, the outlook remains extremely challenging.

"Mortgage financing continues to elude potential borrowers, while rising unemployment is increasingly testing buyers' resolve to own their own home. On balance, market consensus opinion remains negative in tone."

Barratt cut 1,900 jobs between July and September last year - about 29% of its staff.

It said it had also identified a further £80m in cost savings during its next financial year.

Barratt said its advance sales had reached about £633m, but it has had to rely heavily on incentives such as shared equity and part exchange to tempt would-be buyers.