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Barratt Developments sees no short-term recovery

UK house builder Barratt developments has come out to confirm there are no signs of a short term recovery in the UK housing market. Despite seeing a significant increase in visitor numbers and sales rates, the group has had to give away substantial profit margin in the shape of incentives and promotions to attract any interest at all. There is concern that these reduced profit margins will put further pressure on the company's balance sheet even though debt has fallen from £1.42 billion to £230 million over the last six months after various asset sales.

At this moment in time companies such as Barratt Developments are literally treading water and trying to survive for the eventual upturn. Dividend rates have been slashed across the board, cash retention is the name of the game and a number of UK house builders have been or are currently in talks with their bankers. Debt mountains have increased substantially over the last decade as mergers and acquisitions became more and more popular at higher and higher prices.

While we should see increased financial liquidity in the housing market over the next six months there are concerns that house prices will fall further and put more pressure on the marketplace. There are literally hundreds of thousands of UK homes uninhabited at the moment which could see more and more people move away from the new build market to the detriment of the likes of Barratt Developments.

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