Barratt Redrow expects a housing market recovery this year on hopes of interest rate cuts.
Britain’s largest residential property developer – formed after Barratt bought its rival Redrow for £2.5billion last year – said there had been ‘some recovery in customer demand’.
And the Royal Institution of Chartered Surveyors said that while housing demand cooled in January, it is expected to ‘heat up in the months ahead’.
But the housebuilder warned a full recovery was dependent on borrowing costs falling to make mortgages more affordable for buyers.
It comes amid concerns over slower-than-expected interest rates cuts after the Budget.
Barratt, which said it would buy back £100million of shares a year, predicted annual earnings would be at the top end of expectations.
Pre-tax profit in the six months to December 29 rose 23.1 per cent to £117.2million. Revenue was up 23.2 per cent to £2.28billion.
The firm completed 6,846 homes in the period, compared with 6,171 a year earlier.
It expects to sell 16,800 to 17,200 properties in the 12 months to the end of June. Shares rose 5.3 per cent, or 23.1p, to 460.1p.
Chief executive David Thomas said: ‘As the economic, political and lending environments have stabilised, there has been some recovery in customer demand and we have seen solid reservation activity since the start of January, building on a strong forward sales position.’
The tie-up with Redrow will deliver at least £100million of cost savings – £10million more than its original target – the firm said.
It previously said the merger would put 800 jobs at risk as it closed nine divisional offices, reducing its overall workforce through a recruitment freeze.
‘This is a strong update with both the synergy upgrade and buyback initiation a positive surprise,’ analysts at JP Morgan said. But Barratt said the Government’s target of building 1.5m homes in five years could ‘only be delivered in a stable macroeconomic environment’.
Labour’s overhaul of the planning system needs to ‘come into fruition’, it said.
And mortgages must be made more affordable ‘either in the shorter term through positive Government action or, longer term, through income growth and lower mortgage rates and availability’.
The Bank of England cut interest rates by 0.25 of a percentage point to 4.5 per cent last week.
But it said cuts would be ‘gradual and careful’ amid fears over persistent inflation.
Richard Hunter at Interactive Investor said: ‘The impending difficulties the consumer will face, in part due to measures in the Budget, could temper demand and indeed affordability.’
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