Help to Buy is a start – but we can never build enough homes unless the State lets go of its land: Barratt boss calls on Ministers to help ease property crisis
Mark Clare may be the boss of Britain’s biggest housebuilder, but he has to admit that he has never bought a Barratt home. As perhaps is more fitting for the chief executive of a company whose profits rose 74 per cent last year, he lives in a five-bedroom Edwardian house in the leafy commuter town of Rickmansworth, Hertfordshire. Then there is the 60ft motor cruiser moored in the Solent.
The boom in profits at Barratt is of course thanks to the resurgence of the British housing market.
Official mortgage lending figures last week showed a 37 per cent rise on the year and much of it is thanks to the Government’s Help to Buy scheme, in which the Treasury underwrites part of the mortgage.
Clare is a big fan. ‘The ability to buy homes with a 5 per cent deposit is creating confidence in the housing market after years of uncertainty going back to the financial crisis of 2008,’ he says when we meet at a block of luxury flats Barratt is building in the Westminster area of Central London.
‘We are seeing queues outside our showhomes – with demand spreading beyond the South-East from Aberdeen to Exeter.’
Clare clocks up 20,000 miles a year driving to sites and says he is to be found visiting at least one every week.
Barratt reports that Help to Buy has so far helped more than 2,800 customers reserve new homes. ‘Many are first-time buyers, but there are others trading up to accommodate growing families,’ says Clare, 56.
He reckons the housing market was picking up even before Help to Buy, with signs of ‘general economic recovery’ boosting demand and helping Barratt record a 73.7 per cent rise in underlying pre-tax profits to £192.3?million in the year to the end of June.
The average price for a Barratt home jumped from £180,500 to £194,800 over the period with a dividend paid to investors for the first time since 2008.
‘We are now seeing a housing market being sustained and pushed forward by better lending conditions and improving consumer confidence,’ he says.
‘Good news on employment is releasing a pent-up demand for new homes as people feel able to take out a mortgage. We are responding by increasing numbers of homes built and buying more land.’
Help to Buy has not been without its critics on both sides of the political divide. Some economists warn that the policy risks fuelling a rise in prices and perhaps even a bubble, but without directly addressing the shortage of affordable homes.
That is where Clare believes Barratt and its peers come in. The rising market boosts demand that is driving Barratt to build more and more properties. ‘We hope to build about 45,000 homes across the UK in the next three years,’ he reveals.
But Clare believes the public sector could do more to free up land. ‘The public sector from the Ministry of Defence to local authorities own more than a third of developable land and we have to find a better way of getting this to market. The planning process for new homes is also still much too slow and needs speeding up.’
The strengthening housing market is a far cry from the dark days after the credit crunch some five years ago. Clare joined Barratt as chief executive in 2006 after a stint as managing director at British Gas.
Within months he oversaw a £2.2?billion takeover of rival builder Wilson Bowden. But the subsequent collapse of the housing market caused by lack of mortgage funds left Barratt with mounting debts and a plunging share price.
‘It was a time for steady nerves and tough decisions,’ he recalls. ‘Jobs had to go and activity reduced along with the need to raise additional funds via a rights issue. But we cut costs, became more efficient and continued planning for better economic times.
‘Our management team emerged stronger and we are now investing in staff – aiming to double the number of graduates and apprentices taken on over the next three years to 600. We’ve also taken back some who lost jobs during the credit crisis – their skills are needed more than ever.’
Clare’s boyhood ambition was to be a racing driver, but he argues his eventual decision to become an accountant has served him well.
Senior finance roles at electronics groups GEC Marconi and Nortel and then British Gas helped him cope with the cyclical nature of the housing market.
‘A grasp of the numbers can steady a business when demand collapses – and it also helps plan ways to recover and grow when times improve,’ he says.
But has his personal experience of housebuying helped him run Barratt? ‘I bought my first home in 1979, a three-bedroom house for £20,000,’ he says. ‘As a young accountant, money was tight, so I understand the pressures of house-buying and now try to make the process as smooth as possible for others.’
He explains that he and his wife Alison have never bought a Barratt home because ‘the opportunity has never arisen’. But his 29-year- old son has bought a new flat from Barratt.
‘He’s very happy with his new home,’ says Clare senior. And just for the record, Barratt’s annual report records that the sale to his son was ‘at a fair and reasonable market price based on similar comparable transactions’.
‘I never try to influence my children on buying property. My daughter, who is 27, bought a new-build flat from a rival builder and is equally satisfied with her choice. My other daughter is 17 so house-buying is still to come for her.’
As for that motor cruiser, it is named Madness. ‘It has nothing to do with my taste in music or the expense of keeping a boat afloat: the name is made up of initials of family members,’ he explains with a smile.
And of course it is certainly not a reference to rising house prices.