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Barratt drops plans to sell shared equity loans amid market turmoil

The country’s largest housebuilder has pulled out of talks to sell its £170 million portfolio of shared equity loans after “wider macro uncertainties” hit values.

In a statement released in August Barratt confirmed it was “in the early stages of looking at options to monetise part of its interest in (the shared equity) portfolio”.

But finance director David Thomas today confirmed that the talks had been halted.

He said:  “We recognise that the wider backdrop of financial markets has been challenging and we don’t think now is the right time to realise their value.”

Barratt had been the first major housebuilder to enter such talks as it looked to free up cash to build more homes.

Its decision to press ahead with the plan was seen as highly significant by the market, with many housebuilders closely watching the prices it managed to achieve.

The decision to pull back from the talks will be viewed as a negative indication as to where investors expect house prices to go in the medium term.

Mr Thomas’ comments came as the company today released a strong trading update in which it predicted “substantially higher profits” would be delivered in the 2012 financial year.

In the period from 1 July to 13 November, the company said average net weekly private reservations were up 25.9 per cent, due to an increase in sales sites and an 18 per cent improvement in sales per site.

Barratt chief executive Mark Clare said this was partially attributable to the weak autumn trading last year as consumer confidence was hit by the comprehensive spending review.

But he said there had been “real improvement on top of that comparator” which accounted for around a third of the improvement.

Private average selling prices were up 7 per cent in the period to £207,000 with new site openings from recently acquired land driving “significant improvement” in margins which is expected to boost pre tax profits.

Private forward sales are also up 27.4 per cent on the prior year at 3,221 plots.

New debt as at 30 June 2012  is expected to be at the “lower end of our previous guidance” at around £400m.

Mr Clare said:  “Our strategy of pursuing value rather than volume combined with bringing recently acquired higher margin land into production, is delivering a significant improvement in operating performance.

“The location of our new sites coupled with our highest quality housing is helping to drive pricing and some recovery in sales rates. However, without an increase in the availability of mortgage finance, industry growth will remain constrained.”

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