Housebuilders hardly need a leg-up when the housing market is already over-stimulated

Demand is “very strong”, prices are rising and the order book is a fifth fatter than a year ago, but a chairman of a housebuilder can always find something to grumble about. John Allan of Barratt Developments frets that many lenders aren’t offering 95% loan-to-value mortgages these days.

Nils Pratley 

Most observers might regard the banks’ relative restraint as sensible. After all, house prices are being pumped up in a recession – to record levels, the Nationwide tells us – by stamp duty holidays and the approach of restrictions from next spring on the Help to Buy scheme.

Allan, however, has a different take: “It is important that lenders and the government consider what further options are available to help potential first-time buyers who want to purchase their own home,” he says.

Is it really important, though? Maybe for housebuilders, who would prefer lovely trading conditions to continue indefinitely. But “further options” sounds suspiciously like the sector’s usual bleat for more subsidies.

Allan didn’t offer ideas, but elsewhere one can hear calls for the temporary stamp duty holiday on house purchases worth less than £500,000 in England and Northern Ireland to be made permanent. Or perhaps next spring’s trim for Help to Buy, which will place regional caps on eligibility, could be delayed?

On both scores, Rishi Sunak, the chancellor, would be silly to listen. The greatest chunk of the Treasury’s subsidies always sticks to the housebuilders, who really don’t need a leg-up. Yes, Barratt’s pre-tax profits in the 12 months to June fell 46% to £492m, but look at the financial ratios: operating profit margins of 14.4% and a return of capital employed of 15.6%.

Most companies in most other sectors would love those figures in good times. Barratt got them despite “unprecedented disruption” when sites were closed during lockdown. And its “cautious optimism” for the current year translates as confidence that returns will soon be back to plumper pre-lockdown levels.

The best way to help first-time buyers, one could say, would be for house prices to drift lower and for Barratt et al to accept healthy, as opposed to exceptional, margins. An over-indulged sector does not need more help.