The housing boom in the UK is having a positive effect on the profits of housing developers, as house builder Barratt Developments revealed an update its full-year profits for this year (2013-2014).
The company said that houses it sold for £195,000 the previous year were now selling for £220,000 – representing a 13% increase in the price of a Barratt home. The company said that the price rise was partly because it was build more homes which were larger than average – but also partly because of the increase in property prices across the UK.
Barratt’s Group Chief Executive Mark Clare said that the company had increased the number of houses it was completing, in response to the UK’s housing shortage. In the last year completion have risen by 8.6% to 14, 838.
The company’s profits are expected to double this year to £390 million.
Mortgages continue to be cheap in the UK – the Bank of England this week announced it would be maintaining the base rate at 0.5%, keeping mortgage repayments low in the short-term.
Interest rates are expected to increase, but it is unclear when the Bank of England will begin to increase interest rates.
Bank of England Governor Mark Carney has been accused by Labour MP Pat McFadden of behaving like an “unreliable boyfriend” in issuing seemingly contradictory statements about when interest rates are likely to rise.
In June, house prices in some areas of London saw a dip of between 3.7% and 4.8% – but to April this year, the average house price across the UK rose by 9.9% to £260,000.
The rise in property prices is also having an effect on rents – in some areas of London traditionally considered low-income, such as Hackney, rents have risen to £2,000 a month. In desirable central London areas such as Marylebone and Kensington, average rents have now risen to £5,000 a month.
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