Barratt chief executive Mark Clare has said the housebuilder will look to enter more joint ventures in the wake of huge cuts to the government’s social housing budget.
The company sold just 2,528 private plots in the 20-week period to 14 November, compared with 3,336 in the same period last year.
The firm’s revenues were up 9 per cent against the same period last year thanks to selling larger homes and fewer flats. But Barratt joined Persimmon, Taylor Wimpey and Redrow in blaming the lack of mortgages available to first-time buyers for weaker than expected autumn trading.
This lack of private demand is coupled with a 74 per cent cut to the Department for Communities and Local Government’s communities budget outlined in the Comprehensive Spending Review.
In a statement to the Stock Exchange, Barratt said it was continuing to explore JVs to access opportunities and reduce the investment required to take them up.
Mr Clare said: “We think it’s a good model that we would want to do more of and there seems to be a lot of interest from housing associations, particularly when you consider the changes to social housing.”
In October, Barratt entered a 50:50 JV with London & Quadrant Housing Trust to acquire a site in Alie Street on the edge of the City of London.
It will build 235 residential units for a 50 per cent share of the profits and a management fee for construction and marketing services.
The partners will jointly provide the equity to finance the cost of land, with L&Q providing a development facility on normal commercial terms to the joint venture.
The company is also working closely with the Homes and Communities Agency’s regional delivery partner panels.
Mr Clare said: “We have secured one of the first projects through this, the North Prospect regeneration in Plymouth.
“We are shortlisted for 10 more developments and it has the potential to be quite important for the business.”
Mace is another company keen to use JVs and innovative financial models to help deliver more developments.
The company’s new director of residential Simon Underwood said he saw opportunities in social housing.
“I want to work with registered social landlords to find a solution to the fact that the tap has been turned off the grant.
“Some of that will come from joint ventures and different types of funding.”
Mace has recently agreed terms for its first social housing contract at Barking Riverside and Mr Underwood confirmed there were more plans in the pipeline.
Panmure Gordon managing director Mark Hughes said the housing market would remain difficult in the short to medium term, which would lead to more JVs.
“It is a way for housebuilders to use their capital more effectively, so I think it will be attractive and there will be more use of land creditors.
“It’s all about reducing gearing and using what you have effectively - we will see more of it in the future.”
Chief construction adviser Paul Morrell echoed the sentiment when he delivered the JCT Povey lecture last week.
Mr Morrell said: “Innovation will be vital. New ways of working will include more partnerships and new ways of funding.”
London mayor Boris Johnson recently established a 13-strong housing task force, including top financiers, with a remit to devise new models for delivering housing through innovative funding models.
The Council of Mortgage Lenders last week revealed that lending had fallen to its lowest October level for a decade.
Gross mortgage lending was £12.4 billion in October 2010, unchanged from September but down from £13.6bn in October last year. In the peak years of 2006 and 2007, gross lending was about £350bn.
Mr Hughes predicted the sector would weather the storm and benefit in the long term.
He added: “Public sector workers have been afraid to move house for the past 18 months because they are afraid of losing their jobs.
“When the vast bulk of them keep their jobs they can begin to consider moving again. That will start from spring onwards and it is a potentially significant market.”