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Barratt the Big Builder is Doing Well, But I'll Still Avoid the Shares

By Malcolm Stacey | Friday 12 January 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Hello, Share Snackers. The building sector is an interesting one. And previously I've sounded optimism for building firms. After which, we've seen some big increases in share prices.

This has been due partly to government incentives to build more homes, together with rising prices for bricks and mortar. But I think the party may be cooling for some builders, including for Barratt Developments (BDEV).

Six-month figures from the famous house builder showed that sales of new homes were fairly flat. On the other hand, house prices rose by nearly 7%, so the company gained. But can this improvement continue?

Wages are suffering from inflation, which stops folk raising the huge deposits required these days. Foreigners are already starting to avoid buying property in Blighty due to Brexit worries. And we hear that families are leaving the south-east, where house prices have always been high. That will help to equal out prices which may fall to the lower levels. Also, though the government has promised more measures to speed house building, there have been few newer initiatives lately.

We also have the possibility of interest rates going up. Maybe not a lot at first, but they are bound to gather pace, eventually. Land prices have been rising, too. And like most commodities, the previously bashed-in price of raw materials has been recovering.

At the end of the year, the company had cash of £165 million, which will come in handy for its policy of buying more land. But a year before the money pile was £196.7 million. Happily, some of that money went to shareholders by way of rising dividends. And Barratt says it will pay a special dividend of £175 million in November 2018.

Yes, I know some of what I say may encourage to buy the shares, rather than avoid them. It's just that my instinct tells me that there may be a cooling of the housing game. Though I might be wrong, of course.

And now let's build some fun in the Punter's Return.

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