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Strong fundamentals supporting the Barratt share price

Barratt Share Price

The Barratt share price is up by 1.05% on Monday after the homebuilder found some momentum during the second half of July. Despite a fall in June, the Barratt share price has performed well over the past 12 months, thanks to its strong fundamentals and a booming housing market. As the stamp duty holiday comes to an end, and with many expecting the housing boom to cool off, now is an ideal time to analyse the stock.

Rising House Prices

Government policies aimed at boosting demand for homes have helped push the sector to recover following the pandemic. UK house prices rose by 13% in June compared to the same month in 2020.

As seen by the above graph, the Barratt share price has reaped the benefits, with the average selling price of properties soaring.

For the year to June Barratt completed 17,243 homes, which was just shy of its figure for the same period in 2019, before the pandemic.

However, in July, the market cooled off somewhat, although house prices were still 10.5% higher than the same point a year ago. This might give some investors a moment of pause when considering betting on the Barratt share price over the longer-term.

Outlook

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Barratt possesses some fundamentally good qualities as a stock. Firstly, it has a strong pipeline for the year to June 2022 of more than 14,000 homes sold at a value of £3.5bn. In addition, the FTSE 100 homebuilder is atop £1.3bn in net cash. This offers investors a level of stability and predictability that buyers of airline shares could only dream of.

Martin Beck, senior economic adviser at EY Item Club, told the Financial Times that “The odds of a significant correction in house prices anytime soon looks small”.

However, Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, countered Beck’s point: “house price growth has probably now peaked. The larger than expected slowdown probably marks the start of a sustained deceleration in house price growth between now and the end of the year.”

While the level of demand for homes and the ongoing price level remains up for debate, there will still be plenty to do for Barratt. This, in addition to the company’s strong fundamentals, bodes well for the Barratt share price.

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