Bellway will build a third fewer homes this year
- Bellway aims to complete around 7,500 homes by the year ending July 2024
- The Newcastle-based company completed construction of 10,956 the previous year
- UK housing demand has been negatively affected by rising mortgage rates
Bellway has warned it could build almost a third fewer properties this financial year amid an ongoing slowdown in the property sector.
The Newcastle-based company is aiming to complete around 7,500 homes over the 12 months to July 2024, compared to 10,956 a year earlier, due to a much lower booking rate and order book.
In the first nine weeks after early August, the group reported that reservations (buyers who retain the right to purchase a home for a specified period of time) averaged 133 per week, up from 199 during the equivalent period last year. .
Lower forecast: Newcastle-based Bellway aims to complete around 7,500 homes over the 12 months to July 2024, compared with 10,956 a year earlier.
Bellway said its forward sales earlier this month were valued at £1.23bn, more than 40 per cent below October 2022 levels.
Demand for new builds has dried up in response to a rise in mortgage costs caused by the Bank of England raising interest rates on 14 consecutive occasions in an effort to combat inflation.
Rising mortgage rates were exacerbated by former Prime Minister Liz Truss’ controversial mini-budget which raised borrowing costs.
Bellway’s sales rebounded during the spring as borrowing costs moderated, but fell again over the summer as charge-offs and mortgage rates rose.
Despite this, the company’s turnover fell just 3.7 per cent to £3.4 billion in fiscal 2023, as higher social housing construction volumes partially offset a drop in sales. new private units.
It also reported that pre-tax profits more than halved to £483m thanks to a significant drop in building safety improvement costs.
Jason Honeyman, Bellway’s chief executive, said the company “delivered resilient performance against a backdrop of rising mortgage interest rates and challenging market conditions.”
Bellway Stock They were down 1 per cent, or 22p, to £21.84 early on Tuesday afternoon and have risen by about a fifth in the past 12 months.
However, due to sales incentives and the increasing proportion of social housing being built, the company predicts that the average sales price of its properties will fall by a further £15,000 to around £295,000 this year.
Meanwhile, underlying operating margin will shrink further amid weaker production levels and elevated cost pressures.
Oli Creasey, equity research analyst at Quilter Cheviot, said: “While these are clearly difficult trading conditions, the outlook is not materially different to those already offered by peers.”
Barratt Developments expects to build around 20 per cent fewer homes in the current financial year, while Redrow forecasts its underlying pre-tax profits will more than halve to between £180m and £200m.
Creasy added: “Bellway and other housebuilders are expected to be able to weather the storm, although it may depend on how far into 2024 or beyond the market stress reaches, given good cash balances and effectively zero debt.”