Bellway profits nosedive 62% after large drop in new home-builds

Bellway’s profits fell in the first half of the financial year, due to a slump in home completions amid persistently high financing costs.

The Newcastle-based company saw pre-tax profits fall 61.6 percent to £117.4 million in the six months ended January.

Total turnover fell by 29.6 per cent to £1.27 billion, while the number of new-build homes fell by around 1,600 to 4,092.

However, bosses pointed to an easing in mortgage rates as they struck a more optimistic tone on the prospects for the UK housing market.

Sales and profits were further affected as average selling prices fell 2.4 per cent to £309,278 as the group built a smaller number of private homes.

Since mid-2022, the UK housing sector has been hit hard by high mortgage costs, which have led to a decline in new home purchases and slowed house price growth.

The problems were exacerbated later that year when interest rates rose following the controversial autumn mini-budget, which caused widespread panic across the economy.

Borrowing costs fell slightly in early 2023, but rose again in the spring and summer due to higher-than-expected inflation.

Demand for housing has been further affected by strict planning regulations, significant pressure on the cost of living and the end of the Help to Buy scheme.

However, sales are picking up again because rising wages, in combination with falling inflation and mortgage interest rates, are strengthening consumer confidence.

But Bellway’s private booking rate rose 15.4 per cent to 105 per week, with the group seeing an ‘encouraging level’ of consumer demand during the traditionally quieter winter trading period.

The FTSE 250 company said it remains on track to build around 7,500 homes this fiscal year, although this would still be around 31 per cent lower than the previous year.

Jason Honeyman, CEO of Bellway, said the company has “delivered another resilient performance during a period of challenging market conditions.”

He added: ‘While the economic backdrop remains uncertain, the gradual reduction in mortgage rates in the first half has helped to ease affordability constraints, and we are encouraged by the improvement in reservations since the start of the new calendar year.’

Bellway’s results come just a month after Britain’s competition authority opened an investigation into the company and several other major housebuilders over allegations they keep house prices high by sharing commercially sensitive information.

Bellway shares were 1.9 per cent lower at £25.82 on Tuesday morning, although they are up around 29 per cent in the past 12 months.