UK Housing Recovery: Barratt Developments Sees 62% Profit Leap After Help to Buy Fuels 'Exceptionally High' Activity

Barratt Developments has seen a sharp spike in profit off the back of the UK housing market recovery and "exceptionally high levels of activity" thanks to the Help to Buy scheme.

The house builder, one of the UK's largest, said its profit from operations jumped 62.2% in the year to the end of June 2014, hitting £409.8m ($659m, €510m).

It said its private average selling price lifted 12.9% to £241,600 over the same period, outperforming the UK market which has seen average house price growth rates of around 10%.

In its full-year results, Barratt said the outlook is "a return to more normal seasonal trends following exceptionally high levels of activity post the launch of Help to Buy in April 2013".

According to the Office for National Statistics (ONS), the average price of a UK home rose by 10.2% in the year to June 2014 to reach £265,000.

This rise has been fuelled by higher mortgage demand as the economy recovers and interest rates are low, against a serious dearth in the supply of homes.

Construction firms, who saw a collapse in output after the financial crisis, are now chasing the profits to be had in the housing market as demand and prices rise.

The government has helped to increase demand through its Help to Buy scheme, a package for borrowers that makes mortgages cheaper and easier to access.

But housing demand will likely moderate over the coming years as the supply picks up and mortgage market regulators – the Bank of England and Financial Conduct Authority – tighten lending rules.

They are concerned that some people are stretching themselves by taking on loans larger than they can afford to pay for higher house prices.