21 Aug 2009

Should Barratt be rescued?

Rumours in the City have it that Barratt will soon be coming cap in hand with a rights issue. It wants to be baled out of its debt mountain. If it happens, then expect a flurry of activity from the other quoted housebuilders who, with the notable exception of Berkeley, all seem to be sinking in debt that they can’t service. They are all waiting on an upturn in the housing market to enable them to get back to business as usual, get building and start raking in the profits once more.

If Barratt was a single householder, it would have been repossessed by now. “Behind on the mortgage payments, are we? Well, you’ve got two weeks to get out.”

But of course the UK housebuilders are collectively too large to be repossessed, so the banks don’t dare pull the plug. For a start, there would be almost no one around to snap up all the land which would be sold off, and this would put further downward pressure on prices, which the banks fear as much as anyone.

But what if the fabled upturn fails to materialise? What if the way things are now is how it’s going to be from now on? Maybe this is what a stable housing market looks and feels like? Instead of forever looking for signs of whether house prices are going up or down, just accepting the fact that they really don’t change that much from year-to-year and learning to live with the consequences.

One of which would be that we wouldn’t need cash-hungry housebuilders anymore.


  1. I hope they do go under, along with a few others. The major housebuilding companies are the reason why the UK's housing stock is small and mediocre, and why housing estates in the middle of nowhere get built. All the speculative building doesn't help prices either as the houses are overpriced. The continental system of self build has it's benefits.

  2. I hope they fall as well as all the other big national house builders.

    If they do fall, we might actually stand a chance building better quailty houses. It might mean we stand a remote chance of achieving or getting close to the government's zero carbon targets.

    I agree with the comments above. There is a lot to be said for the way other countries look at house building.

  3. So what can we do to help them fall? Who do we elect into parliament, what laws need changing, which decision makers and investors need a new vision? Imagine all the affordable land and all the wonderful houses that are going to be build by self-builders on it. UK houses will finally become designed to live in, rather than just for maximum return-on-investment. Imagine a housing market that has the same stable 2% annual inflation rate as the rest of the economy for the next 50 years (like e.g. Germany had for the last 50 years). The building-suppy industry could see a huge and invigorating demand for the sort of innovative products that have currently no chance on the speculative-builders market.