Bellway has hailed record revenues in its last financial year but warned of uncertainty thanks to rising interest rates and the threat of recession.
The North East housebuilder posted revenue of £3.5bn in the year to the end of July, a 13.3% increase on the previous year, while operating profit was boosted 22.9% to £653.2m. In preliminary results to investors, the plc said it had entered its new financial year with a strong order book but noted that pandemic-induced demand for new homes had started to fall away over the summer as reservations decreased by 12.4% compared with the same period last year.
Despite what it called a strong forward order book, Bellway noted the backdrop of rising interest rates and "wider economic uncertainty" meant it expected to deliver similar volumes to this year. It said the results would be influenced by the autumn and spring selling seasons.
Read more: Britishvolt holds emergency talks to keep North East gigaplant plans afloat
Speaking to Business Live, Bellway's group finance director Keith Adey, said the new Chancellor's reversal of some of the measures within the mini-Budget was welcome. He explained: "What was beginning to happen, towards the back of the summer and as we went into August, is that demand was perhaps beginning to slow a little. There was perhaps two sets of reasons.
"One is operational and that is you've got fewer outlets which are open at the moment - our construction programme is a bit more weighted towards early stages so there was less availability of homes for sale, which we expect to reverse in the second half of the year. Also, there was this market slowdown because of the cost of living and interest rates beginning to rise.
"What actually happened, if you look at our sales rate in August it was down a little bit. And then throughout the whole of September it was 30-40% down in terms of reservations, and that spanned both sides of the Budget. I think all the Budget has done is create a bit of a shock, which we hope is temporary and people begin to adjust to what might be a new world in terms of interest rates."
An additional £346.2m has also been provided to fund work on legacy safety issues - including cladding since the Grenfell Tower incident - taking Bellway's total spend on these issues to £513.7m since 2017. Bellway has previously committed to fixing issues on buildings it constructed since 1992.
Elsewhere the firm said it expects average selling prices this year to decrease to £300,000, compared with £314,399 last year, though the movement is said to primarily reflect a higher proportion of social housing completions. Uptake of the Deposit Unlock offered by some lenders was said to be low although its availability gave Bellway confidence as the Help-to-Buy scheme draws to a close for new reservations later this month.
Chief executive Jason Honeyman said: "Bellway has delivered another strong performance. Our strengthened land bank and resilient balance sheet provide a platform for long-term growth and, importantly, during a period of economic uncertainty, they enable the group to take a more cautious approach to land investment in the year ahead.
"Our long-term model is our strength and is supported by an underlying demand for new homes. Bellway's growth will continue to be disciplined as we maintain a clear focus on the high standard of our product, margin, quality of profit and value creation."
There have been gathering signs of a housing market correction as soaring mortgage rates and worries over the wider economy are set to push down on prices. Halifax said earlier this month that average UK house prices fell by 0.1% in September, while the Royal Institution of Chartered Surveyors warned last week that the market has lost momentum, with new buyer inquiries falling for the fifth month in a row.
Average rates on two-year and five-year fixed mortgages sailed past 6% in the weeks following the mini-budget turmoil – the highest since 2008 – sending shockwaves through the property sector.
READ NEXT:
- Bazaar Group gears up to double workforce
- Chamber and automotive group tasked to develop North East skills plans
Tanfield Group receives £3.97m settlement from US law firm amid Snorkel legal battle
North East deals of the week: key acquisitions, contracts and investments
- Read more North East business news here
