Barratt Redrow urges Burnham to slash tax to boost housebuilders
Barratt Redrow has called on Prime Minister-to-be Andy Burnham to cut taxes to encourage housebuilding and remove “barriers to home ownership”.
The FTSE 100 housebuilder urged the government to address “the increasing regulatory and tax burdens that are constraining viability” to “unlock higher levels of housing delivery, including affordable housing”.
Burnham has pledged to back affordable housing and has indicated support for an overhaul of property taxation.
But the housebuilder set out the scale of reform needed in its update to investors on Wednesday, writing that urgent reforms to tax and red tape are needed to “tackle the housing crisis, create jobs and drive economic growth”.
Last week, Barratt Redrow called on the government to axe stamp duty for first-time buyers to boost the housing market, in a joint plea with homes portal Rightmove.
The property website found that adverts for new developments were at the lowest level since January 2017. Stamp duty weighs especially heavily on first-time buyers in London, according to Zoopla, because of inflated house prices in the capital.
The government offers a £300,000 relief from stamp duty for first-time buyers but nearly eight in 10 first-time movers living in London pay the tax, according to the property portal.
Housebuilders have turned towards Andy Burnham for help in recent weeks. Last month, FTSE 250 housebuilder Berkeley called on the former mayor of Greater Manchester to offer “strong political leadership” on housebuilding.
There is “no prospect of material improvement” for the conditions faced by housebuilders “without more decisive intervention” from the government, Berkeley had said.
Barratt bows to buyback pressure
Barratt Redrow said on Wednesday that it will allow its shareholders to take advantage of the “significant discount” of its share price to its net assets.
The housebuilder will buy back £386m of shares in the year to July next year, which it said is the “most effective way to create long-term shareholder value”.
The company’s share price has reached its lowest level in more than a decade in recent weeks, having shed nearly 60 per cent of its value in the last five years. Its shares jumped three per cent to 286p on Wednesday’s market open.
Barratt Redrow had faced significant pressure to launch a wide-ranging share buyback. Phoenix Asset Management, one of the housebuilder’s longest-serving shareholders, published a 430-page report calling on the firm to return as much as £1bn per year to investors.
The firm said it is well positioned to drive “attractive” returns for shareholders despite the inflationary risks posed by the Iran war, “alongside industry headwinds and subdued consumer demand”.
“This buyback only goes so far in reversing the dismal share price performance, and the recent revival of Middle East hostilities shows that there is still plenty that could go wrong for the sector if inflation returns with a vengeance,” Chris Beauchamp, chief market analyst at IG, said.
Barratt Redrow built 17,667 homes in the year to the end of June, reaching the upper end of its guidance, including 3,774 affordable homes.
The company valued its order book for future projects at £2.8bn, down four per cent from £2.9bn at the same time last year.
Cost inflation could rise again
The firm was established in October 2024 as part of a merger between Barratt Developments and Redrow. The new company will deliver £53m in cost savings as a result of its joint operations this year, it said.
Building cost inflation rose to three per cent following the outbreak of war in Iran, Barratt Redrow said, pushing average cost inflation across the year up to two per cent.
Recent “volatility” in energy prices and supply chains caused by renewed tensions between the US and Iran could push up building cost inflation in the coming year, the housebuilder warned.
“However, the extent of any impact remains uncertain and will depend on movements in energy prices, broader market conditions and the pace at which supply chains normalise,” it added.